UK News
Insights from the UK and beyond
from Felix Salmon:
Immoral bankers
The UK's Institutional Investor Council has issued a blistering report on the excessive fees that investment banks charge companies to issue new shares -- fees which one issuer are "usually immoral". It certainly seems that way, looking at this chart: fees have been steadily increasing over time, even as the discount at which the new shares are issued has got larger and larger. The bigger the discount, of course, the less risk taken on by the underwriter, since the more that the share price would have to plunge overnight in order for the underwriter to risk losing money on the deal.
Yes, this chart includes the financial crisis, and it stands to reason that fees for rights issues would rise during a crisis. But we're not in a crisis any more, and the fees aren't coming down to their historical levels, even though the discounts are still enormous. And it's notable that fees hit these highs on a percentage basis just as the amount of underwriting was surging:
What we're seeing here is a textbook example of banks squeezing every last dollar they can out of their clients just when those clients are most desperate for money. And it stands in stark contrast to legal fees, which were considered fair by issuers and which have not risen visibly at all over the past few years.
None of this is illegal, of course, but it's fair to call it unethical, if ethics are fundamentally based on the principle of "treat others as you would like to be treated".
Testing the limits of animal lab experiments
A mouse that can speak? A monkey with Down’s Syndrome? Dogs with human hands or feet? British scientists want to know if such experiments are acceptable, or if they go too far in the name of medical research.
The Academy of Medical Sciences has launched a study to look at the use of animals containing human material in scientific research.
The ethics of gazundering
I have a confession to make. I pulled out of a property transaction earlier this year and left the seller high and dry. I’d like to say it was because of my impeccable sense of timing in all matters financial. That I could see the UK housing market was tanking and that commuter flats (such as the one I was trying to buy) would tank more than most. Or even that I was playing hard-ball and but had my bluff called. In fact, it was none of these – my solicitor spotted a show-stopping legal hitch and off I went to rent instead.
It didn’t stop the estate agent questioning my decision though. Was I trying to ‘gazunder’ the seller, he mused aloud in a subsequent phone call. Fortunately, though journalists (and estate agents) are sometimes accused of being only loosely acquainted with ethics, I was able to show I had the purest of motives. But, according to estate agents, gazundering – where buyers demand a last-minute price drop -Â is back with a vengeance.
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The Wall
