Actively-Managed ETMFs Coming to a BrokerDealer Near You

Posted on by admin

BrokerDealer.com blog update is courtesy of reporting by InvestmentNews.com and profiles deal between RIA titan Envestnet and mutual fund king Eaton Vance, which is now approved to promote its novel, actively-managed ETF product “NextShares.” NextShares are exchange-traded funds that are both actively managed and unlike any other ETF product, does not disclose the underlying components of the respective ETFs. These products now go by the acronym “ETMF”

Since its approval, Eaton Vance has had to work hard to convince competitive money managers to license its patent and persuade broker-dealers that it is in their interest to make NextShares available to advisers even though the funds don’t offer the same underlying fees to encourage distributors. Eaton Vance’s NextShares-promoting subsidiary, Navigate Fund Solutions, has had to make that case before it even has a product on the market or a distribution partner.

BrokerDealer.com provides a global directory of regulated securities professionals operating in 30 major countries across the free world.

The deal is a big win for Eaton Vance, an actively managed mutual fund company that’s hoping to replace those products with a potentially more tax-efficient vehicle that could lower costs and improve performance for investors. Envestnet is a major gatekeeper in the fast-growing market of independent financial advisers, providing services for over $700 billion in client assets.

In a statement, an Envestnet executive, Jim Patrick, described NextShares as a “groundbreaking fund structure” and said the company sees offering the funds as part of its mission to help advisers deliver “wealth management services in the most cost- and tax-efficient way possible.”

ONLY APPROVED PRODUCT

NextShares was the first and remains the only structure approved by the Securities and Exchange Commission that allows an actively managed open-end fund to trade on exchanges without regularly disclosing its holdings. Portfolio managers resist showing the securities they buy and sell, in part to prevent being taken advantage of by competitors.

Index funds don’t face similar restrictions. Those passive products have dominated the fast-growing $3 trillion global market for exchange-traded funds.

For the full story from InvestmentNews.com, please click here.

 

Mother Merrill Takes A Stand re Fiduciary Standards

Posted on by admin
merill

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.

SEC Advisory Group Proposes BrokerDealer Background Check Database

Posted on by admin
download (17)

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.

 

BrokerDealer Smacked With Price Gouging Penalty-Class Action Award for $850k Against Newbridge

Posted on by admin
price gouging

Brokerdealer.com blog update couresy Bruce Kelly of InvestmentNews from 25 February.

An independent broker-dealer, Newbridge Securities Corp., has reached an agreement to settle a class action suit costing the firm $850,000. The suit filed was filed by Newbridge clients from June 2008 to January 2013. The former clients alleged the firm price gouged clients for postage and handling on securities transactions. In addition to the class action suit, Newbridge Securities Corp., was fined $138,000 by FINRA for failing to buy and sell corporate bonds at a fair price for their customers. 

Per Investment News:

The Financial Industry Regulatory Authority Inc. fined the firm $138,000 for allegedly failing to buy and sell corporate bonds at a fair price for their customers. The firm allegedly failed to take into consideration relevant circumstances “including market conditions with respect to each bond at the time of the transaction, the expense involved and that the firm was entitled to a profit,” according to Newbridge’s BrokerCheck profile. The firm did not admit or deny the allegations as part of the settlement.

The firm lost $434,600 on $37.9 million in revenue in 2013, according to its most recent annual audited financial statement submitted to the Securities and Exchange Commission.

In May 2011, Finra CEO and chairman Richard Ketchum raised the issue of postal price gouging by broker-dealers in a speech to industry executives.

Postage and handling fees charged by broker-dealers ranged at the time from $3 or $4 to as high as $75 per transaction, executives said. Some firms had been inflating postage and handling fees after the financial crisis as a way to boost profits.

The issue of postage and handling costs has been hanging over Newbridge for four years. In April 2011, the Connecticut Banking Commissioner fined Newbridge $10,000, alleging that the firm charged a “handling fee” that was unrelated to actual transactional costs and that the firm failed to tell customers the fee included a profit to Newbridge, according to BrokerCheck. Finra in January 2013 fined Newbridge $50,000 over the same issue.

For the entire article from InvestmentNews, click here

The Odds Aren’t In Morgan Stanley’s Favor With Parody Video

Posted on by admin

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

morgan stanley parodyMorgan Stanley, a leading investment firm specializing in wealth management, investment banking and sales and trading services, just wanted to have little fun at their 2014 branch manager’s meeting. They created a parody to the “Hunger Games: Catching Fire” movie but choose not to show it, for very good reason. Unfortunately for them InvestmentNews obtained a copy of the video and has shared, the news has been catching fire (pun intended) and people aren’t happy. 

One senior executive from corporate branding firm, The JLC Group, which counts a number of financial service firms as clients stated, “On the one hand, one could defend the video production as an effort to appeal to a certain employee demographic. On the other hand, whoever enabled the video to be released should have both hands tied behind their backs. Or, MS execs should simply take a cue from the video’s title and fire the manager who was behind this project.”

There’s a grain of truth in every joke, and while a video Morgan Stanley produced last year as entertainment for a branch managers’ meeting was an obvious parody of the “Hunger Game” film series, it provides a unique, behind-the-scenes look at the country’s largest wealth management firm.

The 10-minute video, titled “Margin Games: Manager on Fire,” was ultimately shelved and never shown at the branch managers’ meeting in February 2014. But the video, a copy of which was obtained byInvestmentNews, seems to reflect a cutthroat culture among wirehouse managers and a lack of congeniality between leaders in the field and executives in the home office.

(The video is being presented here in its entirety because it is a parody and individual scenes may not make sense without the full context and plot.)

Starring a number of the firm’s top brass, including Shelley O’Connor, who oversees the firm’s approximately 16,000 advisers, the film has executives in a war room at headquarters, pitting branch managers against each other in a death match resembling the one portrayed in the “Hunger Games” series.

There are moments where managers joke about the coldness of senior leadership: “They’ll have somebody at your desk on Monday,” one manager says to a competitor.

Stereotypes?

Other scenes feature jokes that hinge on racial stereotypes, including having an Asian woman appear as the expert in martial arts who pulls knitting needles from her hair and throws them at a dart board.

The company won’t talk about the video or say why it decided not to show it. A spokeswoman for the firm would say only that the video was never released.

But according to sources familiar with the video who did not want to be identified, Greg Fleming, the president of Morgan Stanley Wealth Management, was involved in the decision. Sources cited different possible reasons for pulling the video, including concerns of human resources personnel about some of the jokes or scenes of violence in the workplace.

Some current and former Morgan Stanley executives who asked not to be identified said the fact that a video was even made that joked about people who were losing their jobs shows the detachment of executives from other employees. In fact, two months after the managers’ meeting,the firm began a reorganization. The firm cut the number of regions to eight from 12 and reduced the divisions from three to two. One of the divisional directors who was featured in the video, for example, left the firm after his position was eliminated. Four regional managers were moved to different roles.

For the complete article and to view the original video, click here.