Mother Merrill Takes A Stand re Fiduciary Standards

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Brokerdealers beware, the voice of a supporter could give the Department of Labor’s best interest standard of care push it needs to win others over. As the debate continues over a best interest standard of care, many are struggling to accept the idea but now the voice of John Thiel’s supporting the Department of Labor’s push for best interest standard of care could be the tipping point for opponents. This brokerdealer.com blog update of InvestmentNews’ Mason Braswell’s article, “Merrill seeks to be leader on fiduciary” with excerpt below.

Bank of America Merrill Lynch executive John Thiel’s move last week to call for a “best interest” standard of care and for working with the Labor Department marks a turning point in the debate over a fiduciary standard, industry observers and proponents of a uniform standard said.

Rather than treating it as a “force to be reckoned with,” Merrill Lynch has turned the fiduciary standard into a competitive advantage, said Blaine Aikin, chief executive of fi360, a fiduciary consulting firm. Betting on a controversial proposal from the Labor Department also gives more credibility to the wirehouse’s push for goals-based wealth management and puts pressure on other major brokerage firms to speak up, Mr. Aikin and others said.

“They’re saying, ‘We’re not afraid of that [best-interest standard]. That’s how we think the business should be run, and we’re not afraid,’” said Barbara Roper, director of investor protection at the Consumer Federation of America.

In voicing his support of that standard, Mr. Thiel broke ranks from top executives at other wirehouses. Indeed, those executives have all said they support a best-interest standard in theory, but have refrained from going so far as to support the DOL proposal.

The Securities Industry and Financial Markets Association has said the DOL’s proposal would limit the industry’s ability to serve mass-affluent clients because it would hamper their ability to receive commissions. It has offered support for the SEC coming up with a rule, as long as it can preserve certain elements of the brokerage business model.

That stance against the DOL, however, has drawn criticism and painted Wall Street as being opposed to investor interests. A New York Times story from June last year was titled “Brokers Fight Rule to Favor Best Interests of Customers”. The issue gained more attention when President Barack Obama said that conflicted advice was costing Americans billions.

Merrill Lynch’s move shows that the wirehouses may have more to gain, particularly from a marketing perspective, by supporting the issue, according to Mr. Aikin.

“It’s a smart approach to take,” he said. “I do think it puts pressure on [other firms].”

The move also made sense for Merrill Lynch from a business standpoint, Mr. Aikin said. The four wirehouses have all been trying to bill their advisers as sitting on the same side of the table as clients as they push more fee-based relationships or managed accounts where advisers are already required to act as fiduciaries, he said.

“It’s a natural place to go, and we see that change taking place,” Mr. Aikin explained. “And then technology is just making things much more transparent, so it’s very difficult to have nontransparent types of communication or conflict forms of compensation that exist in the products.”

To continue reading the article from InvestmentNews, click here.

Etsy Vendors Will Be Able To Invest In Themselves

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Brokerdealer.com’s blog update continues coverage of the Etsy IPO. On Thursday, Etsy’s IPO will finally be launched, they have unique plan to target small investors and focus on fewer big investors as part of its plan for their IPO and now it has been release that Etsy’s vendors will be able to invest in themselves. Etsy has set aside 5% of shares for Etsy vendors to purchase through a Morgan Stanley program. The vendors can buy between $100-$2,500 worth of Etsy stocks, how much vendors get will ultimately depend on the pricing and demand of Etsy’s IPO. This brokerdealer.com blog update is courtesy of the Wall Street Journal’s article, “Etsy Vendors to Get a Piece of IPO“, with an excerpt below. 

Jeni Sandberg usually deals in vintage and collectible items, not in hot new stocks. Still, the home-based art appraiser and consultant plans to take a stake in Etsy Inc. when shares in the online marketplace go public this week.

Ms. Sandberg, who lives in Raleigh, N.C., has been a vendor on Etsy for five years, earning income from her sales there and from work as an art consultant. A former specialist at auction house Christie’s, she manages her own investments and is “by no means a massive player in the financial market.”

When it comes to initial public offerings of stock, “you’re always told, ‘You can’t participate. You’re not part of a financial syndicate. Go away, little person,’” she said.

Etsy, whose IPO is expected to price Wednesday and begin trading Thursday, sought to remedy that lack of access for its vendors and other small investors with a program that gives them the opportunity to buy as much as $2,500 in Etsy stock just before its public float, which aims to raise as much as $267 million. Ms. Sandberg plans to claim her full allotment. “This, I want to do,” she said.

To read the full article from the Wall Street Journal, click here.

Tech IPO Looks To Out Fund Etsy

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Last week brokerdealer.com‘s blog profiled the different practice the peer-to-peer e-commerce company, Etsy, planned to use for its own billion dollar  IPO. Now a little known New York tech company, Virtu Financial, is planning to launch its own billion dollar IPO this week that will rival Etsy’s. This brokerdealer.com blog update is courtesy of Crain’s New York Business’s article, “The $1B-plus startup IPO coming this week that’s not Etsy“, below is an excerpt.

The long, cold winter has ended,and the thaw is extending to the IPO market. Etsy, Brooklyn’s sentimental favorite,is making headlines with a public offering this week that could raise as much as $267 million, giving it a valuation of nearly $1.8 billion.

But another New York tech company, one that you’ve probably never heard of, is also going public this week—and it plans to raise more money than Etsy. Virtu Financial, a high-speed trading firm, believes investors will fork over as much as $361 million for shares that would make it worth $2.6 billion.

Hard to warm to

Virtu, founded in 2008, is not the sort of company you easily warm up to. It put off a public offering last year when the Michael Lewis book Flash Boys shone a highly unflattering light on high-speed trading. (The Wall Street Journal points out that Virtu has since allied itself with a company that doesn’t hurt other investors with its trading technology and that it earned a favorable mention in the paperback edition of the book.)

Etsy, meanwhile, has made news with an IPO strategy that has been described variously as handcrafted and artisanal. It is spreading the wealth around among smaller investors by putting a cap of $2,500 on the amount of stock that retail in-vestors can buy.

To continue read this article from Crain’s New York Business, click here.

SEC Advisory Group Proposes BrokerDealer Background Check Database

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Brokerdealer.com blog update profiles the SEC Investor Advisory Committee’s proposal for the SEC to develop a database of brokerdealers and investors’ information regardings secruities law violation in order to protect clients from fraud. This update is courtesy of InvestmentNews’ article, “SEC panel calls for a single database to run background checks on all financial professionals“. with an excerpt from the article below.

The Securities and Exchange Commission should develop a database that compiles information about securities law violations and is easy to use for investors, especially the elderly, an advisory group said Thursday.

In its quarterly meeting at SEC headquarters, the SEC Investor Advisory Committee floated a proposal to have the SEC work with other federal and state financial regulators to develop a single website to house disciplinary information about investment advisers, brokers and other financial professionals. As a step toward that goal, an IAC subcommittee suggested the agency provide a single portal for investors to access information in SEC and Finra databases.

The proposal likely will be voted on by the full IAC at the group’s July meeting.

“This is something from an investor protection perspective, which certainly is the mission of this committee, [that] can play a very important role for the public,” Ms. Sheehan said.

To read the entire article from InvestmentNews, click here.

 

Etsy’s IPO Plan Is Very Crafty

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Etsy is a peer-to-peer e-commerce website focused on handmade or vintage items and supplies, as well as unique factory-manufactured items. Last month, brokerdealer.com profiled  Etsy’s preperation for an IPO, now new details are emerging about Etsy’s plan for its IPO. Etsy hopes to target small investors and focus on fewer big investors as part of its plan for their IPO. By using this unusual practice, Etsy hopes to gain shareholders who share in Etsy’s commitment to socially responsible business practices. This brokerdealer.com blog update is courtesy of the Wall Street Journal’s article, “Even Etsy’s Initial Public Offering Process Is Artisanal” with an excerpt below.

Leave it to Etsy Inc. to craft an artisanal public offering.

The Brooklyn, N.Y.-based online marketplace for handmade and vintage goods has altered the playbook for its initial public offering, launching an expansive effort to attract small investors and focusing on fewer big investors, according to people familiar with the deal.

The custom-made process is intended to build a shareholder base that is on board with what Etsy says is its commitment to socially responsible business practices and its plans to spend heavily on marketing to grow its membership over the next few years, the people said.

But going off script comes with some risk. The moves include limiting the amount of stock retail investors can get in the IPO to $2,500 so more individuals can take part, and concentrating many of the shares among a relatively small number of big holders. The approach could turn off some traders whose presence can help stabilize a stock once it begins trading.

To continue reading about Etsy’s plan for its IPO from the Wall Street Journal, click here.