When the publisher’s of RIABiz asked me to comment on the various changes the SEC is considering as a result of the Dodd-Frank Financial Reform Act of 2010 (Dodd-Frank) I took the opportunity to point out that one of the proposed changes depends very much on the SEC’s willingness to fully embrace one of the other proposed changes. Specifically, if the SEC wants to increase the duty that stockbrokers owe their customers, they must also change the current system of forcing investors to arbitrate disputes with brokers. Investors must have the choice to take their disputes to the county courthouse.
We tried mandatory arbitration during the two decades in which the securities and banking industries nearly destroyed the world economy. Now is the time to scrap it. It provides no transparency and is completely useless as a guide to proper stockbroker behavior. Read the article and tell us what you think.
Mamas Don’t Let Your Babies Grow Up To Be Compliance Officers
All of the company’s high flown rhetoric about protecting customers, safeguarding their retirement savings, helping them save and build assets for the future, is exposed as so much marketing dross, devoid of substance.
It’s a familiar story; those who’ve read The Vigilant Investor know it well: compliance officers at a brokerage firm identify a broker who is abusing his customers. They bring the problem to the attention of senior management and recommend that the broker be fired. The first question that senior management asks after getting that recommendation is, “What’s his production?”, which, when translated, means “How much money does he make us?” If the answer is a big number, senior management thinks that the rogue broker deserves another chance. (more…)