Investment advisors and brokers continue to go independent, and they are taking more assets with them when they leave their firms, according to an InvestmentNews article by Lavonne Kuykendall entitled “When going indie, advisers take more assets: Fidelity,” which cites Fidelity Investments’ 2011 Broker and Advisor Sentiment Index.
Continue reading "Brokers Transition to Smaller,Independent Firms" »
Expecting licensed professionals who provide investment advice to act in their clients’ best interests “should be a basic tenet of the business,” but brokerage firms and their brokers don’t want that fiduciary yoke, says Karen Blumenthal in her InvestmentNews article, “When Your Adviser Can’t Be Trusted.” Moreover, they don’t want the public to know that they don’t want to be held to a fiduciary standard. So, while brokerage firms profess to be trusted advisers or like a member of a client’s family in their advertising, their lobbyists are working hard to persuade the SEC to weaken the “devil in the details” definition of the term “fiduciary” for purposes of governing brokers’ relationships with customers.
The new whistleblower program that pays big cash rewards for tips about investment fraud has already resulted in a large number of high quality tips to the SEC, according to a news story this week on CNBC. According to the report, the SEC expects to receive 30,000 tips this year—just one year after the program was created under the Dodd-Frank financial reform act. SEC Enforcement Director is quoted as saying “we’re gonna get information hopefully sooner on in the life cycle of a fraudulent scheme, so there’s less investor loss, less harm.” In addition to helping the feds detect fraud in the securities industry, however, the program promises to pay big financial rewards to the whistleblowers whom report it.
Continue reading "Wall Street Whistleblower Program Already Paying Off" »
Wall Street may face a wave of lawsuits under an expanded version of the Martin Act, New York’s securities anti-fraud statute, if the newly elected Governor of New York has his way, according to a Wall Street Journal Deal Journal blog entitled, “And the Next Mortal Threat to Wall Street Is…”.
Continue reading "Proposed Changes to New York Law Would Make Wall Street More Accountable" »
It’s crunch time for financial reform, and Wall Street banks are lobbying hard to keep a central pillar of financial reform from becoming law, and, at the same time, are planning ways of getting around whatever financial reform restrictions do become law, according to a recent New York Times article by Eric Dash and Nelson D. Schwart titled “Banking Lobbyists Make a Run at Reform Measures.”
Brokerage firms’ advertising portrays brokers as trusted members of the family, writes Tara Siegel Bernard in her New York Times article, “Trusted Adviser or Stock Pusher? Finance Bill May Not Settle It.” Anyone who has tried to hold a broker to a fiduciary standard of conduct, however, hears a very different response: “We are mere order takers. You never should have trusted us.”
Continue reading "Is Your Financial Adviser Acting in Your Best Interest?" »
According to a recent Bloomberg National Poll, more than 50% of Americans despise Wall Street and favor punishment of the bankers who caused the worst financial crisis since the Great Depression. The majority of poll participants -- 56 percent -- say big financial companies are more interested in enriching themselves at the expense of ordinary people.
Continue reading "It's Official - Most Americans Despise Wall Street" »
Independent financial advisers are gaining on Wall Street brokers in the competition to manage more than $5 trillion in Americans' savings, according to E. S. Browning in his recent Wall Street Journal article, “More Brokers Flee Big Firms, Taking Investors With Them.”
The Wall Street Journal reports that “hundreds of businesses are fighting to recover billions of dollars tied up in frozen auction-rates securities, a year after Wall Street firms agreed to $60 billion in settlements over the collapsed market for the investments.” See “Firms Fight Banks Over Billions in Frozen Notes,” WSJ 1/2/10. While regulators stepped in to help individual investors after the auctions froze in February 2008, many corporate and institutional investors did not benefit from settlements between banks, broker-dealers and the SEC, FINRA and state attorneys general. According to Atlanta attorney Craig T. Jones, investors were left holding about $330 billion in illiquid securities when the auctions froze, so $60 billion in settlements is only a drop in the bucket.”
Fidelity Investment has joined Charles Schwab and Morgan Stanley Smith Barney in warning customers about the complexity and risks of Leveraged Exchange Traded Funds (ETFs), reported Daisy Maxey in her article, “Fidelity the Latest to Caution on ETFs,” published in the August 4 Wall Street Journal. Fidelity’s web site now states: “Most [Leveraged ETFs] reset daily and seek to achieve their objectives on a daily basis. Due to compounding, performance over longer periods can differ significantly from the performance of the underlying index.”
The Securities Industry and Financial Markets Association, an important Wall Street lobbying group, has decided to support the Obama administration’s proposal to hold brokers to the same standard as a fiduciary when they provide investment advice, according to a recent report in The Wall Street Journal. While investors who sue their brokers have long argued, with considerable success, that a fiduciary duty arises whenever there is a relationship of trust and confidence between broker and investor, that determination is presently made on a case by case basis under laws that vary from state to state. A federal standard, which is more likely to pass now that it has been endorsed by the industry, would make it easier for investors to prevail in claims against brokers.
Continue reading "Wall Street Trade Association Supports Fiduciary Standard" »
Target-Date mutual funds are not always what they appear to be, reports Leslie Wayne in her June 25, 2009 article in the New York Times entitled “Target-Date Mutual Funds May Miss Their Mark.” Target-Date mutual funds are supposed increase the allocation of bonds over time in order to reduce volatility as an investor approaches retirement. Stocks are generally more volatile than bonds, and investors generally increase the percentage of bonds to add the stability to a portfolio of investments.
Continue reading "Investors Need to be Careful with Target-Date Mutual Funds" »
Evergreen Investment Management Company (“Evergreen”), a unit of Wells Fargo & Co., has agreed to pay more than $40 million to settle an enforcement action by the Securities and Exchange Commission (“SEC”) and the Massachusetts Securities Division, according to articles in the Wall Street Journal and Reuters. Evergreen was a subsidiary of Wachovia at the time of the violation, according to Reuters.
On May 13, 2009, the U.S. Securities and Exchange Commission (“SEC”) approved a rule change that requires brokers to disclose alleged sales practice violations made by a customer against a securities broker in the body of a civil lawsuit or arbitration claim, even if that broker is not named as a defendant or respondent. The SEC received a total of 1,654 comment letters on the proposed rule change. Approximately 1,451 of the letters were “form letters” from financial advisors and insurance agents (who sell insurance products such as variable annuities) opposing the change.
Fidelity Brokerage Services LLC has had trouble retaining some of the most successful brokers in its Private Client Group as a result of questionable sales practices. According to an article in Investment News, dozens of brokers serving Fidelity’s most affluent clients recently left the firm because, even though they were required to obtain certified financial planner certifications (CFP), they were prohibited from disclosing details of their bonus compensation, thereby violating the certification they were required to obtain. In addition, some former brokers claim that Fidelity required them to push proprietary products that were unsuitable for some of their clients.
Continue reading "Questionable Sales Practices Haunt Fidelity" »
Fidelity Investments, the world’s largest mutual fund company, will lay off 1,300 employees, or 3% of its work force this month. It will also conduct a second round of job cuts in the first quarter of 2009 that is anticipated to impact another 1,700 employees.
Continue reading "World's Largest Mutual Fund Company Lays Off Employees" »
Yesterday the Financial Industry Regulatory Authority (“FINRA”) announced auction-rate securities settlements with SunTrust Robinson Humphrey, Comerica Securities, First Southwest, and WaMu Investments, Inc.
Continue reading "FINRA Announces Auction-Rate Securities Settlements with More Firms" »
A settlement, in principle, has been reached between a state auction-rate securities task force and Credit Suisse which would require the investment bank to buy back approximately $550 million in auction-rate securities. In addition, the firm will pay a $15 million fine. The investigation of Credit Suisse was lead by the North Carolina Secretary of State and Securities Commissioner.
Continue reading "Credit Suisse Enters into Auction-Rate Securities Settlement with Regulators" »
Both The Wall Street Journal and The New York Times have reported that New York Attorney General Andrew Cuomo’s office has reached an agreement with Fidelity Investments to resolve problems over Fidelity’s marketing of auction-rate securities. According to sources familiar with the negotiations, Fidelity will apparently repurchase approximately $300 million of auction-rate securities from its customers. It is anticipated that the settlement will be similar to other settlements previously entered into and will be limited to small investors (defined as retail customers, charitable organizations and small businesses holding $10 million or less in investments at the firm).
Continue reading "Fidelity Reaches Auction-Rate Securities Settlement" »
While regulators have announced tentative settlements with major Wall Street firms (Merrill Lynch, UBS, JP Morgan, Goldman Sachs, Morgan Stanley, Wachovia, Citigroup, and Deutsche Bank) that underwrote auction-rate securities, these settlements have not addressed the situation of thousands of investors that purchased auction-rate securities through smaller brokerage firms. Most of these smaller brokerage firms were primarily “distributors” of auction-rate securities as opposed to underwriters of the securities. They have not yet settled with regulators and have taken no apparent action to address their customers’ auction-rate securities complaints. Such firms include Oppenheimer, Fidelity Investments, Northern Trust, H&R Block Financial Advisors, SunTrust, Comerica, Stifel Nicolaus, Raymond James, and Wells Fargo.
Continue reading "Many Auction-Rate Securities Investors May Be Left to Fend for Themselves" »
