BrokerDealer Behemoth LPL Financial Undervalued Says HF Activist

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BrokerDealer.com blog update profiling activist fund manager Marcato Capital’s stake in LPL Financial, the financial industry’s behemoth collective of independent brokerdealers is courtesy of InvestmentNews.com.

An activist hedge fund investor on Tuesday afternoon said it had taken a 6.3% stake in LPL Financial Holdings Inc., sending the independent broker-dealer’s stock price higher as the rest of the market declined.

LPL’s shares are undervalued, Marcato Capital Management said in a filing with the Securities and Exchange Commission. Marcato acquired the LPL shares through various funds it controls “in the belief that the shares are undervalued and are an attractive investment.”

Marcato could enter into discussions with LPL’s board to discuss “strategic alternatives” for the company, including a potential for a merger or acquisition, according to the filing.

BrokerDealer.com hosts a global directory and database of brokerdealers in more than 35 countries worldwide.

“These discussions may review options for enhancing shareholder value through strategic alternatives or operational or management initiatives including, but not limited to, improving capital structure and/or capital allocation, M&A, asset allocation, and general corporate strategies,” the company wrote in the filing.

The company’s share price has lagged since it reached a peak of $55.37 in March 2014. Its recent low was $37.72. The stock surged almost 4% after the Marcato filing with the SEC; in early afternoon trading in New York, LPL shares were trading around $41.80. The S&P 500 was down about 1.6% on Tuesday.

ONGOING DIALOG

“LPL Financial maintains an active and ongoing dialogue with its investors and values their input as we work toward the common goal of driving stockholder value,” an LPL spokesman, Brett Weinberg, said in an email.

When asked specifically about a potential merger for LPL, Mr. Weinberg declined to comment.

With close to 14,000 affiliated registered reps and investment advisers, LPL has had growing pains over the past few years. LPL has been in the spotlight recently due to its host of problems with the Financial Industry Regulatory Authority Inc., (FINRA) as well as state regulators. Two products that have caused LPL to pay fines or restitution to clients have been nontraded real estate investment trusts, a popular alternative investment, and variable annuities.

CEO Mark Casady said over the summer that LPL was near the finish line with fines and settlements stemming from securities regulators’ actions.

Alex Kramm, an analyst for UBS who follows LPL, said investment firms such as Marcato focus on why companies are undervalued.

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

Broker Dealer Firm Acquires The Producers Choice In A Move That Will Boost Control Over Annuities

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Brokerdealer.com blog update profile broker dealer firm, Raymond James Financial Inc, making big moves in the industry as it announced Friday, that it would acquireing The Producers Choice. This move made Friday will help  the broker dealer firm gain greater control over the way annuities are wholesaled to advisers. This brokerdealer.com blog update is courtesy of InvestmentNews’ article, “Raymond James bolsters indexed annuities and life wholesaling with acquisition“, by Darla Mercado. With an excerpt from the article below.

Looking to step up its indexed annuities and life wholesaling game, Raymond James Financial Inc. announced Friday it would acquire The Producers Choice, an insurance marketing organization.

The deal is expected to close mid-summer, and Producers Choice will act as part of Raymond James Insurance Group. Sixty Producers Choice employees will join the firm.

The acquisition addresses two major objectives for Raymond James, which has partnered with Producers Choice for nine years: It gives the broker-dealer greater control over the way annuities are wholesaled and marketed to Raymond James’ advisers, and the firm will have the opportunity to work with Producers Choice’s client base of independent insurance agents, broker-dealers and banks.

To continue reading about Raymond James acquistion of The Producers Choice from InvestmentNews, click here.

Finra Focuses On Educational Communication With Investors In New Compensation Proposal

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Brokerdealer.com blog update profiles a new proposal from Finra that has educating investors as their main focus. This proposal is a revised version of the one Finra filed last spring with the SEC. In the previous filing, brokers would have required brokers to disclose to investors recruiting incentives above $100,000 they received for switching to a new firm. This new proposal requires firms to send “educational communication” to investors when a broker moves to that firm. This educational communication proposal is drawing a lot of backlash as critics believe it watered down the original idea for compensation disclosures. This brokerdealer.com blog update is courtesy of InvestmentNews’ Mark Schoeff Jr.  and his article, “Finra releases revised broker compensation proposal“.

Finra released a revised proposal Wednesday for a rule designed to help investors understand the financial incentives their brokers had for switching to a new firm.

Under the rule, brokerages would have to send an “educational communication” to investors working with a broker who is moving to their firm. The document customers receive would outline questions they should ask their broker about the compensation and other inducements the broker is getting to transfer to the new firm.

The questions would help investors determine whether the broker’s financial incentives create a conflict of interest and whether investors would incur costs by following the broker to a new firm.

The broker-compensation proposal is a revised version of one the Financial Industry Regulatory Authority Inc. filed with the Securities and Exchange Commission in March 2014 but later withdrew amid industry resistance.

To continue reading about this investor educational communication focused Finra proposal, click here.

Broker Dealers Support Finra’s Move For Tougher Sanctions

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Brokerdealer.com blog update profiles the broker dealer industry’s support for tougher sanctions for violations of the suitability rule. It is the industry’s hope that these tougher sanctions will elevate the industry. This brokerdealer.com blog update is courtesy of InvestmentNews’ article, “Brokers back regulator’s tough stance on suitability” by Mark Schoeff Jr., with an excerpt below.

Brokers endorsed a move by their regulator this week to toughen sanctions for violations of the suitability rule even as they acknowledged the standard leaves room for interpretation.

The Financial Industry Regulatory Authority Inc.(FINRA) on Tuesday revised its Sanctions Guidelines, which included raising its suggested suspensions to two years from one for brokers making unsuitable recommendations. It also strongly advises possible barring of brokers and expulsion of firms for fraudulent activity.

Cracking down on suitability violations will help clients, said Jeremy Gottlieb, owner of Gottlieb Wealth Management. In reviewing investments of clients transferring to his firm, he often sees evidence that their portfolios were built on the basis of product sales rather than what is in their best interest.

To continue reading about these tougher sanctions that are being backed broker dealers everywhere, click here.

Finra CEO Pumps The Breaks On Massive Data-Collection Proposal

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Brokerdealer.com blog profiles Finra CEO’s, Rich Ketchum, decision to stop working on the proposal for a massive data-collection system with concerns over secruity issues. Ketchum is expected to report to Congress tomorrow, Friday, May 1, 2015, to explain why. Since the proposal’s start it has received much resistance by others in the industry due to fear of putting the clients and risk and seems Finra is now starting to agree. This brokerdealer.com blog update is courtesy of InvestmentNews’ Mark Schoeff Jr.  and his article, “Finra CEO Rick Ketchum backs off data collection plan“, with an excerpt below.

Finra is putting the brakes on its proposal for a massive data-collection system over concerns about the security of customer information, the organization’s chief executive is expected to tell Congress on Friday.

The Financial Industry Regulatory Authority Inc. has received strong industry resistance to its so-called Comprehensive Automated Risk Data System over its potential costs and the possibility that it will expose customer data to hackers. The comment period for the proposal ended on Dec. 1 last year.

In prepared testimony, Finra chief executive Rick Ketchum said that although CARDS will not collect client names, addresses and Social Security numbers, Finra shares concerns about “bad actors” being able to obtain information that “could possibly be reengineered to identify individuals.”

The regulator is studying the potential data-security threats, Mr. Ketchum will tell the House Financial Services Committee, and is evaluating whether CARDS data can be collected through “existing data sources.”

To continue reading about what Ketchum is expected to tell Congress tomorrow, click here.