Investors Gone Wild? Consumer Groups Think So

investors 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. Spain Broker-Dealers and Bankers : Realty Offers Real Deals for Investors

dealbook_post blog thanks NYT DealBook for their coverage of Spain broker-dealer and banker activity. database of Spain broker-dealers, bankers and institutional investors seeking opportunities is a good place to start for those seeking funding and financing.

“As one of the most moribund housing markets in Europe, Spain has become a magnet for global bargain hunters. Real estate prices are down as much as 50 percent from their peak during a housing bubble, and investors from Asia to the United States and Britain are flocking to Spain to try to catch the uptick.

“It’s crazy the number of investors coming in,” said Fernando Acuña, co-founder of Aura, a start-up real estate advisory firm in Spain, as he toggled between multiple screens dissecting data in the residential real estate market and showing the uptick in Google searches for “comprar piso” — “buy an apartment” — in his bustling office on Madrid’s fashionable Almirante Street.

Small firms like Mr. Acuña’s, midsize investment banks in Spain and global banks in London are buzzing with investors looking for different ways to play the real estate market, by buying apartments or office buildings, scooping up loans from Sareb or the banks themselves, creating pools of capital to buy real estate assets or buying servicing platforms, which give the private equity firms that own them the ability to manage their assets as well as critical market intelligence…”

For the full story, please click here.

Peer-to-Peer Financing: A New Way Businesses Are Seeking Loans

P2P might sound like the name of the latest Sony PlayStation video game console, but it’s actually more work and less play. P2P stands for Peer-To-Peer lending – a hot Internet trend on par with Grumpy Cat and planking (at least in financial circles, that is). P2P lending has brought investors and business owners together in a new way of borrowing and lending money without the middlemen. Unfortunately it has also opened up a new set of potential problems where investors may become the big losers in the end.

What Is Peer-To-Peer Lending?

Peer-to-peer lending involves borrowers seeking lending directly from private investors through an online investing platform. There are no banks involved in the process. Let’s say a borrower needs money to upgrade the equipment in their business. They could seek a peer-to-peer lending platform where they fill out an application for the loan. The P2P lending platform does a background check on the borrower’s credit history and debt-to-income ratio. Based on the credit findings, the borrower’s interest rates can be determined as the loan application is put up for an online auction. Some lending platforms will allow the borrower to set up the highest interest rate they will pay while the investor sets up the lowest interest amount they are willing to accept as they negotiate until coming to happy medium.

Borrowers find such an opportunity appealing because they may have been turned down by a bank for a regular loan. The interest rates for P2P lending is also usually lower than what regular financial institutions offer, appealing to borrowers, yet high enough where investors can make a nice return.

Investors can put up some of the loan amount, called “slices.” Normally, there will be several investors involved in financing the loan as they spread their investment about to obtain slices from many different loan-backing opportunities. Once the loan amount is reached, the money is sent to the borrower who now has the money they need.

Pitfalls of Peer-To-Peer Lending

P2P loans are still in their infancy with many people unaware it is an available lending option. Some investors are wary of working through P2P due to the lack of regulations in place on lending platforms. While the glamor of borrowers and investors working closely together to negotiate financing appeals to many, there are still issues that can seriously affect such a lending avenue.

The biggest issue is that P2P lending is mostly unregulated. There are no state-backed guaranties to such a lending platform because it is mostly done online and can cross international borders. A borrower may have dozens of foreign investors involved with the loan, yet there are no guarantees from any actual bank to those investors that they will be paid back for the loan if the borrower defaults.

Since there is no guarantee that the borrower will repay, an investor has to go through small claims court to recoup their funds. Also, what should happen if a P2P platform collapses or experiences some other major financial issue similar to what happened to Bitcoin and the Mt. Gox Tokyo Exchange back in February of this year? The exchange company misplaced half a billion dollars worth of Bitcoin as they filed for bankruptcy proceedings, leaving those people who invested in the exchange out in the cold with no way to recover their lost money.

Until further financial reassurance is into P2P lending, investors and borrowers should use caution and good judgment when testing the waters. If you decide to invest in such a lending platform, do your homework to ensure you will get a solid return on your investment.


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