SEC Chairwoman: Fiduciary View-Do It Right, Not Right Away

Posted on November 10, 2015November 10, 2015 by admin

SEC Chairwoman Mary Jo White says slow pace for instituting new fiduciary mandates for brokerdealers and registered investment advisors is because “the SEC wants to avoid unintended consequences and ‘get it right.’

10 November (InvestmentNews.com)- Securities and Exchange Commission Chairwoman Mary Jo White said Tuesday that agency staff is “full-out” working on a proposal to raise standards for retail investment advice, but that it would take time to “get it right.”

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A primary reason for the slow pace is that the SEC wants to avoid unintended consequences, Ms. White told the audience at the Securities Industry and Financial Markets Association annual conference in Washington.

“If at the end of the day, you are depriving retail investors of reliable, reasonably priced advice, you will not have succeeded, obviously, in your purpose,” she said.

Ms. White’s comments echo those the industry makes when it criticizes the Labor Department best-interests rule for advice on retirement accounts, which is on its way toward finalization.

“It is a reminder that hopefully the DOL will reconsider [its proposal] due to the complexity of the issue,” Ira Hammerman, SIFMA executive vice president and general counsel, said in an interview. “The DOL should re-propose what they’re contemplating so that all interested parties can get one more look at what the DOL thinks the solution is.”

In the five years since the Dodd-Frank financial reform law gave the SEC authority to promulgate a rule that would require all retail investment advice to be given in the best interests of the client, the SEC has not made discernable progress.

“We will move on it as expeditiously as we can,” Ms. White said. “We must get it right and really take into account the complexities and impact. But we’re very full-out focused on it.”

In March, Ms. White told a SIFMA conference she wants the SEC to move ahead on a fiduciary rule. At Tuesday’s SIFMA meeting, she declined to give a timeline, but said crafting a proposal could be a protracted process.

“It’s not a short, quick, uncomplicated rulemaking,” she said.

In addition to a fiduciary duty rule, the SEC is working on a rule that would allow adviser examinations by third-party organizations.

In a meeting with reporters on the sidelines of the conference, Ms. White said the agency is further ahead on the exam rule than the fiduciary rule, but “it’s going to take time to do them right.”

Due in part to the timing of an SEC rule, an advocate for the DOL rule said the agency should proceed independently.

“Nothing that Chair White said today provides any justification for the DOL’s delaying or reconsidering its efforts,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “They need to finalize the rule.”

For the full story from InvestmentNews Daily, please click here

FINRA Chief Honcho Calls It Quits

Posted on October 30, 2015 by admin

FINRA CEO Richard Ketchum will retire from the brokerdealer industry’s self-regulatory organization by the latter part of next year.

According to coverage from BankInvestmentConsultant.com, FINRA’s board of governors is expected to look internally and externally for a successor.

Ketchum has been a critic of the Department of Labor’s proposal for a fiduciary standard for the wealth management industry. In May, he warned that the proposal comes with inadequate guidance to help firms navigate conflicts and ensure that they are engaging in appropriate compensation models when serving retirement plans or individual investors.

BrokerDealer.com maintains the global financial industry’s most comprehensive database of broker-dealers operating in more than 30 countries across the world.

Ketchum, 64, came to FINRA in 2009 from the New York Stock Exchange, where he was CEO of NYSE Regulation, and in the aftermath of the financial crisis. The industry veteran’s career includes 14 years with the SEC, where he was director of the Division of Market Regulation for more than half of his tenure with the agency.

“He worked tirelessly to protect and educate investors while also improving the integrity of the markets,” SEC Chairwoman Mary Jo White said. “Investors are better protected and our markets are stronger because of Rick Ketchum.” Ketchum continues to serve as a member of the SEC’s Market Structure Advisory Committee.

FINRA’s lead governor, Jack Brennan, praised Ketchum “as a champion of initiatives such as the High Risk Broker program, improvements in BrokerCheck, the expansion of TRACE reporting of asset-backed securities, and the expansion of FINRA’s responsibilities across stock and options trading.”

During his tenure at FINRA, Ketchum said in a statement that the organization’s accomplishments were based on a “commitment to excellence in our core competencies: examinations, enforcement, rulemaking, market transparency and market surveillance.”

“Investor protection is our principal reason for being, and I have been honored to work with an incredibly dedicated and talented group of professionals who take this vital mission seriously,” he said.

SIFMA CEO Kenneth Bentsen Jr. said Ketchum was at the forefront of every major milestone in the evolution of the U.S. securities markets over the last 40 years. “He has made his mark in ensuring a robust, efficient and pro-investor marketplace, and we wish him all the best in his retirement,” Bentsen said.

Fidelity Brokerage Arm Is Broken Says Regulator

Posted on October 26, 2015 by admin

Fidelity Brokerage Services was charged in an administrative complaint by State of Massachusetts’s top securities cop Thomas Galvin with “dishonest and unethical behavior” for allowing unregistered investment advisers to make trades through the Fidelity broker-dealer platform, thereby generating fees for both the firm and the unregistered advisers.

At least 13 unregistered Massachusetts investment advisers used Fidelity’s platform, according to a statement from secretary of the commonwealth William Galvin.

For those advisers, “Fidelity served as a haven from regulatory oversight as it ignored blatant unregistered investment advisory activity,” according to a statement from Mr. Galvin’s office.

“We do not believe that Fidelity has violated any laws or regulations in connection with this matter,” said Adam Banker, a Fidelity spokesman. “We look forward to reviewing the details of this matter and addressing them appropriately.”

“Fidelity, of all companies, knows full well the range of investor protection provisions resulting from regulatory oversight,” Mr. Galvin said in the statement. “For them to knowingly allow unregistered activity on their broker-dealer platform is a profound failure of their regulatory obligations.”

In one instance, more than 20 Fidelity customers paid one unregistered investment adviser who was trading on their behalf $732,000 in advisory fees over a 10-year period, according to the complaint. The complaint alleges that Fidelity had knowledge that the individual was acting as an adviser during that entire period and encouraged his trading activity by providing the purported adviser, who made thousands of trades in the accounts of his clients, with gifts such as frequent flyer miles and tickets to a professional sporting event.

Fidelity had policies in place since 2011 that specified red flag risk warnings for certain levels of third-party trading, but those were ignored until recently, according to the statement from Mr. Galvin.

Broker-Dealers Breakaway to Equity-Owned Boutiques

Posted on October 18, 2015 by admin

Breakaway-Broker Movement Continues…

Traditional wire-house brokerdealers and brokers/investment advisors are increasingly departing big securities firms and migrating to equity-owned boutiques that provide these brokers with private equity ownership in a business model that makes more sense to them, and hopefully more dollars.

WSJ’s Michael Wursthorn summarized this new trend in a recent column “Rise of the Broker Turned Entrepreneur…” and gives an update to continuing saga in the now multi-year “breakaway-broker” movement with extract below..

For financial advisers who launch their own independent practices, having equity is king.

Those ownership stakes are very different from the shares many held in big securities firms that previously employed them. The private-company equity comes with big advantages but also risks.

During the financial crisis, brokers at the major brokerage firms suffered a steep drop in a key portion of their compensation: the value of the shares they were given in those firms. Since then, some brokers say they generally have less interest in receiving shares in the firms they work for, instead favoring higher cash payouts, if possible.

But that attitude is being put aside by brokers who are taking flight from the big firms to launch their own practices or who join one already established. In fact, the allure of an ownership stake in a private practice is helping to push more advisers to join the growing number of so-called breakaway brokers.

For the entire 10 October article from the WSJ, click here

Bulls and Bears Make Money; BDs Who Are Pigs..

Posted on October 13, 2015 by admin

As the Wall Street adage goes, “Bulls and Bears Make Money…Pigs Get Slaughtered..” The folks here at BrokerDealer.com could not resist re-distributing the news about former Lehman trader Jonathan Hoffman and his smack down by Federal Bankruptcy Court Judge Shelly Chapman, who ruled that double-dipping isn’t good form and Mr. Hoffman must be bonkers if he believes the Lehman estate should pay him a past-due $83mil bonus–which was the exact amount Lehman’s subsequent owner Barclays paid to Hoffman when he joined that acquiring bank.

The only thing Judge Chapman neglected to add (also overlooked by DealBreaker’s Bess Levin-who published the below) was a reference to Donald Trump’s recent metaphorical comments on the topic of double-dipping.. We says this was an oversight on Judge Chapman’s part only because of the wit in her writ. We can’t explain how gossip writer and social media actress Bess Levin overlooked the joke, simply because she should know better: Any fun story gets much more distance these days whenever inserting Trump’s name into the narrative.

Here’s Bess Levin’s ‘editorial take’…

jonathan hoffman former lehman trader wsj photo

Former Lehman Trader Jonathan Hoffman; photo courtesy of WSJ

Remember Jonathan Hoffman? Former Lehman Brothers trader who later took a job with Barclays, who decided in 2014 that he wanted to figuratively demonstrate the size of his testicles to the world by making the case that although the British paid him an $83 million bonus upon joining the firm, Lehman separately owed him that exact same amount, which he sued the estate to collect? Based on the argument that unlike many of the Lehman employees who were simply taken in by Barclays following the collapse of the investment bank, he could have gotten a job anywhere and chose to join Barclays, with whom he entered into a new contract, separate from the one he had with Lehman? And that the $83 million they paid him was kind of just like a signing bonus, and didn’t let his former employer off the hook? A judge told him Friday to sit down and shut up.

Judge Shelley Chapman of the U.S. Bankruptcy Court in New York said former top trader Jonathan Hoffman is entitled to only about $7.7 million stemming from an unpaid portion of the bonus he was awarded in 2007. Furthermore, Mr. Hoffman will receive only 35 cents on the dollar for the bonus. “Mr. Hoffman was a gifted trader who generated billions of dollars in profits for Lehman over the course of his employment,” Judge Chapman said in an 87-page decision Thursday. But she characterized as “pure nonsense” the Wall Street veteran’s argument that Lehman owed him more than $83 million, even though he had received a similar amount from Barclays PLC. The judge said Lehman’s obligation to pay Mr. Hoffman’s bonus was transferred to Barclays PLC when it bought Lehman shortly after the failed investment bank filed for bankruptcy. Barclays agreed to pay the $83 million and to copy other key terms of his employment agreement with Lehman.’

The entire article can be found at DealBreaker.com