I was studying about Risk Management at the Enterprise level. One of the risks that an enterprise faces is the legal risk. Legal risk is the risk in which the law fails to enforce a contract between two parties. In a typical derivative transaction, an investor would enter into a transaction with an institution (represented by the dealer). But very often, the investor is confused as to who are they dealing with.
Actually, the investor is dealing with a counterparty but very often they thought they are dealing with an adviser. This is the part in which any contract arises between the two parties could fail because of the mistaken belief that the counterparty is an adviser.
The difference between a counterparty and an adviser is world apart. An adviser represents the interest of the investor while the counterparty sits at the opposite side of the trade representing the financial ......