Asia BrokerDealers Ramp Up For More ETFs

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Brokerdealer.com blog update profiles brokerdealers’ push for a more diversified market in Hong Kong. In an effort to listen to the brokerdealers and diversify the market, Hong Kong’s Securities & Futures Commission is looking into allowing more off shore ETFs. An extract from AsianInvestor article, “SFC mulls more foreign ETF listings in HK” tells us more.

Hong Kong’s Securities & Futures Commission (SFC) is considering allowing more offshore ETFs, including from the US to be cross-listed in Hong Kong.

The move comes amid calls by some industry players from Hong Kong to diversify its ETF business, because the product range at present is predominantly Greater-China focused.

A senior executive in the ETF business told AsisanInvestor that the SFC that set up a working group to look into expanding the scope of the ETF industry and further developing int. It reached out to individual fund managers towards the end of last year to solicit interest on cross-listing their offshore ETFs in Hong Kong.

The senior executive said their group was interested in listing its American ETF in Hong Kong, but the decision hinges on the SFC and will involve a change in regulatory policy.

To read the full article from AsianInvestor, click here.

Japan Prepares To Launch A Record Breaking IPO, BrokerDealers Have Been Waiting 10 Years To See

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IPO

Brokerdealer.com blog update is courtesy of MarketWatch “Japan may be set for world’s biggest IPO”. While in America, broker dealers anticipate the launch of a $2.87 billion IPO for GoDaddy.com, Japan Post Holdings is slated to break records with the launch of their IPO.

Last year, China’s Alibaba Group unleashed a monster of an IPO, the world’s biggest to date. But this year, Japan has a monster of its own that by all accounts could blow past the Alibaba listing to become the most massive offering of stock ever seen.

It is easily the hottest topic around the boardrooms and izakayas (after-work drinking halls) across Tokyo: the highly anticipated initial public offering of Japan Post Holdings, the finance-ministry-held behemoth that combines the national postal service with the country’s biggest savings bank and major insurer. Its financial arm alone had ¥205 trillion ($1.71 trillion) worth of assets under management as of December, roughly one-third the entire annual GDP of Japan.

The offering has been more than a decade in the making, surviving fierce political controversy since the idea of privatization was first introduced. The issue was a sensitive one because not only does Japan Post bring in a massive amount of revenue, but also it’s the nation’s largest employer.

Finally, with the government determined to shore up Japan’s debt-bedraggled finances, the stock appears ready to go to market sometime this autumn, with the ministry having set a goal of ¥4 trillion yen, or about $33 billion, for the divestment proceeds. It has earmarked the funds for rebuilding parts of northeastern Japan destroyed by the 2011 earthquake and tsunami.

Such an amount would dwarf Alibaba’s BABA, +1.06%  $25 billion haul — to date the largest in history. Still, much of the details have yet to surface, and according to the Nikkei Asian Review, the event may come as a trio of listings: Japan Post Holdings, along with separate tickers for its subsidiaries Japan Post Bank and Japan Post Insurance. Likewise, some reckonings see the issue as pulling in a somewhat more modest $10 billion-$20 billion.

In discussing the big Japan Post sale, those with longer memories note similarities with the situation a quarter-century ago, when the government privatized its fixed-line carrier, Nippon Telegraph & Telephone 9432, +0.28% NTT, +0.85% Unusually for Japan, its listing was a big event not just for institutions, but for retail investors as well.

For the entire article from MarketWatch, click here

Will BrokerDealer Top Cop Really Get Tough? Fiduciary or Not?

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BrokerDealer.com blog update profiling behind-the-scenes posturing as to whether the SEC might impose a new standard that imposes the concept of “fiduciary obligation” on brokerdealers is courtesy of extract from March 17 New York Times “SEC Chief May Toughen Rules For Brokers.” Below is the snapshot with credit to NYT reporter MICHAEL J. de la MERCED

The chairwoman of the Securities and Exchange Commission announced on Tuesday that she planned to explore setting a higher standard for brokers in dispensing investment advice, putting the agency in the middle of a potential fight between the Obama administration and the financial industry.

Speaking at a conference hosted by the Securities Industry and Financial Markets Association, one of Wall Street’s main trade groups, the chairwoman, Mary Jo White, expressed her personal support for setting up a so-called uniform standard of fiduciary duty.

Such a move would hold stockbrokers and brokerdealers to a fiduciary duty standard, under which they must put their clients’ interests ahead of their own. Registered investment advisers already fall under that higher bar, while brokers follow a looser “suitability” standard that requires them only to mind customers’ needs and appetite for financial risk.

“I believe the S.E.C. has an obligation” to create a uniform standard, Ms. White told the association’s conference.

Ms. White’s comments were her first public thoughts on the matter, coming months after the chairwoman promised to outline her position on the issue.

The S.E.C. has the authority — but no obligation — to create the new standard, thanks to a provision in the Dodd-Frank financial regulation overhaul. The Obama administration backed a similar initiative by the Labor Department to create a higher standard for brokers who oversee retirement investments.

A new standard from the commission would carry more weight, however, since it would encompass all brokers and not just those who oversee retirement accounts.

Behind the call for a tougher standard is concern that loose rules have potentially cost consumers billions of dollars each year. A memo from the White House that surfaced in January estimated that investors lost between $8 billion and $17 billion from their I.R.A.s last year because of a lack of protections.

To read the entire NYT story, please click here.

Ex-NFL Player Forces Defunct Broker Dealer to Fumble But Can’t Recover

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Brokerdealer.com blog update courtesy of InvestmentNews’ Mason Braswell’s 16 March article, “Ex-NFL player left out in the cold after $2 million award”. Ex-NFL and former Green Bay Packer tackle, Bruce Wilkerson found himself in a ponzi scheme has won some money back from a defunct broker-dealer but won’t be able to recover it all. An excerpt from InvestmentNews is below.

Resource Horizons Group, a defunct broker-dealer that had racked up more than $4 million in unpaid damages from arbitration claims, can add another $2 million to that list.

Bruce Wilkerson, a former tackle who started for the Green Bay Packers in the 1996 Super Bowl, was awarded $2 million in damages last week after losing $650,000 in an alleged Ponzi scheme carried out by a rogue broker at the Marietta, Ga.-based firm.

Mr. Wilkerson, however, is not likely to ever recoup any of the money, which represented a substantial portion of his net worth, according to his attorney, Adam Gana.

“It’s outrageous,” said Mr. Gana of an eponymous firm. “There’s virtually no chance that [Mr.] Wilkerson is going to get paid.”

Resource Horizons Group, which had around 220 brokers, went out of business in November after accruing more than $4 million in judgments against it from two arbitration awards, which it could not afford.

“Funds for payment are not available, which is why the company is being forced to close,” the firm said on a filing in its BrokerCheck report. “The clients will have the same right as any other creditors of the company for the funds that are available.”

The Financial Industry Regulatory Authority Inc. officially suspended the firm in December for failing to comply with a $4 million award and then in January canceled Resource Horizons Group’s license, according to its public BrokerCheck record.

The firm, which had only around $500,000 in excess net capital on hand, has paid only a “very small percentage” of the $4 million award, according to the attorney in that case, John Chapman of an eponymous firm.

Mr. Chapman said Resource Horizons Group had applied for insurance coverage around the time the first complaint about the alleged Ponzi scheme cropped up, but was denied coverage because of the nature of the fraud.

“To me this underscores the question of why does Finra allow broker-dealers to operate with such incredibly thin resources?” Mr. Chapman said. “We’re sort of stuck.”

The arbitration awards are tied to an alleged rogue broker at the firm, Robert Gist. In 2013, Mr. Gist agreed to pay $5.4 million to settle charges from the SEC that he had conducted a Ponzi scheme and converted funds from at least 32 customers for personal use between 2003 and 2013. Mr. Gist could not be reached for comment.

He conducted the scheme and made false customer statements for clients through Gist, Kennedy & Associates Inc., an unregistered entity not affiliated with Resource Horizons, according to the SEC’s complaint.

Several clients, including Mr. Chapman’s, filed claims against the firm and its top two executives, David Miller and his wife, Kelly Miller, for negligence and failing to supervise Mr. Gist. They were held jointly liable along with the firm for the nearly $4 million in claims from Mr. Chapman’s case.

To read the entire article from InvestmentNews, click here.

Investors Gone Wild? Consumer Groups Think So

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Brokerdealer.com blog update courtesy of InvestmentNews’ Mark Schoeff Jr.’s 12 March article “Consumer groups accuse SEC of ignoring investors”. The SEC  holds primary responsibility for enforcing the federal securities laws, proposing securities rules, and regulating the securities industry, the nation’s stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United States.

The Securities and Exchange Commission is not fulfilling its duty to protect retail investors, particularly in how it regulates financial advisers, a number of consumer groups asserted in a letter to the agency.

The eight-page letter dated March 10 outlines several areas that the groups say the SEC “can no longer afford to relegate … to a back burner.”

Most of the letter concentrates on ways the groups want the agency to improve regulation of financial advisers and urged the SEC to take “concrete steps” to raise investment-advice standards for brokers.

The Dodd-Frank law gave the SEC the authority to promulgate a uniform fiduciary standard for retail investment advice that would require all advisers to act in the best interests of their clients. The SEC has not acted. Meanwhile, the Department of Labor is poised to re-propose its own fiduciary-duty rule for advice to retirement accounts.

The topic has split the five-member commission. Chairwoman Mary Jo White has promised since November to make her position on fiduciary duty known in the “short term.”

Duane Thompson, senior policy adviser for Fi360, a fiduciary-duty training firm, agreed with the consumer groups that fiduciary duty has languished.

“The SEC seems to have looked more at capital-formation issues,” Mr. Thompson said. “The elephant in the living room is the uniform fiduciary standard. While Mary Jo White has repeatedly said it’s a priority, I’ve never seen it show up on the SEC’s regulatory agenda.”

Other topics the letter highlights include strengthening financial adviser disclosure about conflicts and compensation, reforming revenue-sharing, limiting mandatory arbitration for investor disputes, and beefing up regulation of risky financial products, including some kinds of exchange-traded funds.

“We are concerned that the Securities and Exchange Commission — which has always prided itself on serving as ‘the investors’ advocate’ — appears in recent years to have strayed from its primary focus on its investor protection mission,” the letter stated. “Given the vital role that average investors play in our markets and the overall economy, and the serious shortcomings that exist in the regulatory protections they receive, it is time in our view for these issues to be prioritized.”

Click here to read the entire article from InvestmentNews.