Frmr Brokerage Industry Czar Goes Indie With Direct Approach to Film Finance-Veterans Get a Dividend

Posted on January 28, 2015 by admin

Brokerdealer turned Film Maker, Joe Ricketts

Brokerdealer.com blog update courtesy of 18 January New York Times article.

The former founder and Chairman of online brokerdealer Ameritrade Securities, Joe Ricketts, which since morphed through acquisition and is now known as TD Ameritrade, has a plan that only a creative finance industry czar could put together…and when it comes to creative financing, he’s found his calling in the film finance space. As part of the marketing strategy, Joe Ricketts’ film, “Against the Sun”, a movie about World War II, will donate a matching amount from sales to veterans’ organizations.

Take a quiz about your open-sea survival skills on Buzzfeed. Score maybe 7 of 10, marking you as the type who might make it through a midocean disaster. And up pops an offer of, say, 30 percent off the standard $15 price to buy “Against the Sun,” a new feature film about real Navy fliers who spent 34 days adrift on the Pacific duringWorld War II.

Brutally direct digital sales techniques are standard stuff for e-commerce marketers offering credit cards, resort vacations, shoes or even books that match your presumed tastes or mood of the moment. But movie marketers have been slower to adopt contemporary online equivalents to the classic foot-in-the-door hard sell. Too slow, by the thinking of Joe Ricketts and his colleagues at his American Film Company.

Mr. Ricketts is an entrepreneur who learned a few things about salesmanship while building the TD Ameritrade online discount brokerage firm, of which he was chief executive. Now he has pointed the indie movie studio he founded toward an experiment in the use of low-cost digital marketing techniques to sell “Against the Sun.” The film is directed by Brian Falk, and it includes Tom Felton — Draco Malfoy in the “Harry Potter” series — among its stars.

Made for a little less than $5 million, “Against the Sun” will be shown in a small number of theaters and on a wide range of cable, satellite and digital on-demand services like iTunes, starting Jan. 23. And its relatively modest marketing budget, set initially at $2 million, will be overseen by DigitasLBi, a company that has run digital campaigns for companies like American Express but has virtually no film experience.

Joe Ricketts’ new film will donated to veterans’ organizations

Mr. Ricketts wanted “a digital firm, ideally one that had never marketed a movie before,” said Alfred Levitt, chief operating officer of American Film.

Speaking jointly with George Hammer, a Digitas senior vice president who is coordinating the marketing effort for “Against the Sun,” Mr. Levitt described the sales campaign. It is intended to enhance the impact of dollars spent by focusing on transaction-ready buyers with an appetite for World War II dramas like “Unbroken,” “Fury” and “The Imitation Game.” Conventional studios recently spent tens of millions of marketing dollars on those films.

American Film struck a deal with Participant Media. Its Takepart.com website, which prods film viewers to social action, will offer “Against the Sun” with both a discount and a matching donation to a veterans’ organization, hoping to turn the socially committed into immediate buyers.

Advised of the donation plan, Lou Baczewski glanced at the online trailer and said he was ready to sign on.

A tightly networked history buff, Mr. Baczewski has written a book — “Louch: A Simple Man’s True Story of War, Survival, Life and Legacy” — about his grandfather’s experiences as a World War II tank driver, and he says he is planning to retrace a European invasion route by bike, to raise money for the Honor Flight Network and others.

Mr. Baczewski said he would happily spend money on the film if part of the profits were donated to veterans. “What better way to depict the struggles and battles of human endurance than by telling a true story?” he said.

For the entire article, click here.

Oppenheimer’s Penny Stocks Results in $20M Fine

Posted on January 28, 2015January 28, 2015 by admin

Oppenheimer fined for failure to report suspicious penny stocks

Brokerdealer.com blog update is courtesy of Mason Braswell from InvestmentNews

Brokerdealer firm, Oppenheimer & Co. Inc., has reach a deal with the SEC and FinCEN resulting in the firm paying $20 million, pleading guilty, and hiring an independent consultant over improper penny stock trades. The SEC and FinCEN said, firm failed to prevent suspicious penny stock trading and pump-and-dump schemes.

The firm, which runs a retail brokerage operation with around 1,400 financial advisers, failed to properly detect and report suspicious trades in penny stocks, which are thinly traded securities that can be vulnerable to manipulation by stock promoters, according to FinCEN. The regulator identified at least 16 customers in five states who engaged in “patterns of suspicious activity.”

“Broker–dealers face the same money laundering risks as other types of financial institutions,” said FinCEN Director Jennifer Shasky Calvery, in a release. “And by failing to comply with their regulatory responsibilities, our financial system became vulnerable to criminal abuse. This is the second time FinCEN has penalized Oppenheimer for similar violations. It is clear that their compliance culture must change.”

In a parallel action, the SEC pointed to two instances between 2008 and 2010 in which the firm engaged in unregistered sales of penny stocks.

In one case, a financial adviser and his branch manager willfully engaged in unregistered sales of 2.5 billion shares of penny stocks on behalf of a customer, despite the fact that the shares were not exempt from registration, according to the SEC settlement. The trades generated $12 million in proceeds, of which Oppenheimer was paid $588,400 in commissions.

The settlement did not name the broker or branch manager, but said that its investigations into the matter were ongoing.

The other charge revolves around Oppenheimer’s role in possibly assisting allegedly illegal activity by a Bahamas-based brokerage firm, Gibralter Global Securities.

The firm disclosed in quarterly filings earlier this year.

that it was setting aside $12 million to deal with the possible fallout from regulatory investigations, mostly dealing with penny stock issues.

The head of the firm’s retail brokerage, Robert Okin, resigned in December, reportedly to pursue other interests. His Finra BrokerCheck record discloses he is facing an SEC investigation.

A spokesman for Oppenheimer, Stefan Prelog said in an email that the firm was “pleased to put these matters, which involve activity that occurred years ago, behind it.”

The firm has also agreed to hire an independent consultant as part of the settlement.

Risk is Worth the Reward: Brokerdealers Still Have Faith in Russia

Posted on January 27, 2015 by admin

Brokerdealer.com blog update is courtesy of Bloomberg Businessweek’s Ben Steverman.

For the past few years, only risk-taking brokerdealers have had the courage to invest their clients’ money into the Russian Market. Many brokerdealers have not been able to see what opportunity there was in Russia. Bloomberg’s Ben Steverman has been able to crack the code and found the opportunity.

On paper, there’s no good reason to invest in Russia right now. The country’s dealing with a collapsed currency, plunging oil prices, recession, conflict in Ukraine, sanctions, and a government that’s hard to predict. The MSCI Russia Index lost almost half its value last year, and those losses could continue in 2015 and even into 2016. On Monday, as fighting in Ukraine intensified, the ruble dropped another 2.3 percent against the dollar, to its lowest level since Dec. 16.

For the intrepid, the thrill-seeking, or the very wealthy, however, Russia still has an appeal. Since August, investors have poured $861 million into the Market Vectors Russia ETF (RSX), the largest U.S.-based Russia fund. “In investing, what is comfortable is rarely profitable,” according to investment firm Research Affiliates in a new analysis. “Investing in Russia now is definitely discomfiting, but it might pay off in the long run.”

Here’s the opportunity they see:

Investors are watching Russia’s inscrutable and unpredictable government for any signs that President Vladimir Putin might be ready to make nice with the West or reform the Russian economy. So far, no dice. But, historically the Russian government has been more “business-friendly and reform-minded” when oil prices are low, Bank of America strategist David Hauner said in a Jan. 12 research note. Oil under $50 a barrel could spur Putin to do something about Russia’s economy, famously unproductive and overly reliant on the energy industry.

Sanctions are depriving Russia of the foreign technology and capital it desperately needs, to the tune of $100 billion in capital this year, BofA estimates. But, Research Affiliates notes, those sanctions are “relatively mild” compared with those imposed on Iran, Cuba, or North Korea. And Russia still has relatively low debt and high currency reserves, while it continues to provide much of Europe’s energy. “Logically, this crisis should pass,” Research Affiliates says.

Finally, in exchange for the extreme risks involved with Russia, investors are getting some outstanding deals. The MSCI Russia Index’s price-earnings ratio is 4, compared with the Standard & Poor’s 500-stock index’s 18.1. Based on their valuation, Research Affiliates calculates Russian stocks could return 16.9 percent per year over the next 10 years, more than any other developed or emerging market.

Then again, the firm also expects Russia to be the second-most volatile market in the world during that time span, after Turkey. Investors may need strong stomachs for quite a while: Without reforms, Bank of America estimates Russia won’t fully recover from this downturn until 2019.

For the original article from Bloomberg Businessweek, click here.

There’s an App for That: Investing Apps Challenge Brokerdealers

Posted on January 26, 2015 by admin

Brokerdealer.com blog update is courtesy of InvestmentNews’ Sarah O’Brien.

Independent brokerdealers face challenges everyday. Now with the boom of smartphones, investors are demanding investment apps for their phones. Independent brokerdealers struggle to compete because they don’t have the resources to meet these demands.

An increasingly tech-savvy investor base is challenging independent broker-dealers to meet the demand for simple technology in a way that fits into the complexities of advisers’ businesses and keeps investors’ personal information protected.

“The benchmark is being set, whether we like it or not,” said Edward O’Brien, senior vice president of technology platforms for Fidelity Institutional, during a recent InvestmentNews roundtable discussion with IBD technology leaders.

“Everyone loves the simplicity of their apps and their iPhones and everything they use every day,” Mr. O’Brien said. “We’ll be expected to somehow figure it out and sort it out for our users.”

A Spectrem study released last year showed that 23% of mass affluent investors (net worth $100,000 to $1 million) use mobile technology devices — such as smartphones and tablets — to buy and sell investments, as do 39% of millionaires ($1 million to $5 million) and 62% of ultrahigh-net-worth investors ($5 million to $25 million).

But as younger investors, who are more reliant on their mobile devices and more comfortable using technology for a multitude of tasks, begin to develop more wealth and seek out financial advisers, those percentages are expected to rise.

“The next generation spends more time on devices we haven’t even thought about yet,” said Patrick Yip, director of advisory market technology strategy for Pershing.

Security — whether regarding account access through mobile devices or for electronically stored private data — is also a major concern as technology evolves.

“Where does security fit in all of this and how do we keep privacy protected for clients?” asked Doreen Griffith, executive vice president and chief information officer at Securities America Inc.

She pointed out how frequently hacking episodes and security breaches occur at companies across all industries. According to Symantec’s 2014 Internet Security Threat Report, in 2013, there were 253 security breaches, representing a 63% annual increase and resulting in the exposure of 552 million identities.

Also, 38% of mobile users experienced mobile cybercrime in the previous 12 months, with lost or stolen devices remaining the biggest risk, according to the report.

PRIVACY EXPECTATIONS

“I think the consumer expectation of privacy is going to be changing with all of the security [breaches] that are going on,” said Ryan Reineke, chief operating officer and senior vice president of technology at Cambridge Investment Research Inc.

The IBM Security Services 2014 Cyber Security Intelligence Index showed that, among the industries monitored by the company, finance and insurance were the most targeted for hacking attempts, making up about 24% of all attempts. The study also showed that among IBM’s clients, the average company endures about 1,400 security breach attempts a month.

Additionally, security concerns come into play with IBD third-party vendors. If an IBD uses a cloud service, for instance, the company has to worry about that provider’s system getting hacked.

“How about all these security reviews that we put the vendors through?” asked Jon Patullo, managing director of technology product management at TD Ameritrade Institutional. “If we were able to standardize that, it would make it easier on all of us to integrate with them as well.”

Also important is figuring out to what degree mobile device usage should be part of an IBD’s technological focus.

“One of the things we’re struggling with is trying to strategically decide where we’re going and whether or not we’re really being mobile-focused [or] touchscreen-focused, or the next thing might be voice-focused,” said Darren Tedesco, managing principal for innovation and strategy at Commonwealth Financial Network. “Ultimately where we think it’s going is to talk … It’ll be “Trade Darren Tedesco, Roth IRA, 100 shares, at market, done.’

“When you’re dealing with that as the user experience, you’re dealing with the interface,” Mr. Tedesco said.

For the full article from InvestmentNews, click here.

Fidelity Fined For Overcharging Fees for 7 Years

Posted on January 21, 2015 by admin

Brokerdealer.com blog update courtesy of InvestmentNews’, Mason Broswell.

One of the largest mutual funds groups, Fidelity Investments has been ordered to pay a fine after inappropriately charging fee-based accounts that received brokerdealer services for over 7 years.

The Financial Industry Regulatory Authority Inc. has ordered Fidelity Investments to pay a $350,000 fine after the firm allegedly overcharged more than 20,000 clients a total of $2.4 million.

From January 2006 to September 2013, Fidelity inappropriately charged for certain transactions in fee-based accounts in its Institutional Wealth Services group, which provides trading and brokerage services to investment advisers and their clients, Finra said in a letter of settlement.

Finra said the overcharges resulted from a lapse in supervision over how Fidelity applied fees under its asset-based pricing model, which generally charged on assets rather than by transaction.

“The firm did not clearly delegate responsibility for the supervision of fee-based brokerage accounts,” Finra said in the letter of settlement. “In fact, until 2013, the firm did not designate a supervisory principal to oversee its [institutional wealth services] asset-based pricing program.”

As a result, certain clients may have been double-billed or charged excess commissions in addition to the asset-based management fee, according to Finra’s letter. For instance, in over 1,000 fixed income transactions initiated by advisers, clients were erroneously charged a markup on the transaction in addition to the asset-based fee, Finra said.

Fidelity discovered the problems in the spring of 2012, self-reported the issue to Finra and voluntarily reimbursed all clients, according to Adam Banker, a spokesman for Fidelity. The issues affected roughly 1.5% of the brokerage accounts held for investment advisers and the majority required reimbursement of less than $100, according to Mr. Banker.

“[Institutional Wealth Services] conducted a thorough internal review of this matter, which resulted in the implementation of enhanced controls and oversight for its asset-based pricing program,” said Mr. Banker in an emailed statement. “IWS completed these steps prior to the conclusion of Finra’s review of this matter.”

The firm agreed to the settlement letter without admitting or denying the findings.

Fidelity’s Institutional group is the third-largest custodian when ranked by number of registered investment adviser clients and serves around 3,000 RIAs, according to InvestmentNews’ RIA Custody Database.

Fidelity’s direct-to-consumer, workplace savings accounts and correspondent broker-dealer clearing business, which operates as National Financial, were not affected, Mr. Banker said.