Posts belonging to Category Stockbroker Standards of Conduct

FINRA’s BrokerCheck Full Of Holes


FINRA’s system for revealing red flags about brokers may not disclose all the information that it is supposed to, according to a Wall Street Journal article by Jean Eaglesham and Rob Barry (March 7, 2014).  A report by FINRA’s BrokerCheck should include information about felony charges and convictions, personal bankruptcy petitions filed within 10 years, […]

SEC Study: ‘Most U.S. Retail Investors Lack Basic Financial Literacy’


The SEC has found that most investors understand very little about the financial products they buy. In the wake of the financial crisis, Congress, suspecting that the financial illiteracy of ordinary investors played a role in the crisis, commissioned a study by the SEC as part of the Dodd-Frank mandate. The SEC has completed its […]

Wall Street’s ‘Suitability’ Duties to Customers are Updated


A new Financial Industry Regulatory Authority (FINRA) rule (Rule 2111) significantly broadens stockbroker duties owed to customers. The rule, which took effect July 9, 2012, is expected to weaken or eliminate certain arguments brokerage firms use to try to deflect liability (“New FINRA rule seen as weakening brokerage defenses,” by Suzanne Barlyn, Reuters).

Study Confirms that Too Many Financial Advisers Fail to Act Professionally


Investors sometimes hire a financial adviser to manage their money professionally if for no other reason than to escape their own irrationality. Many investors know that, in investing, their emotions can be their worst enemy ? leading them to buy high and sell low. They think that a financial adviser, detached from their emotions, will […]

Bloombergs (The Mayor And The Company) Pile On Greg Smith–Why?


In the wake of Greg Smith’s op-ed piece about why he is leaving Goldman Sachs, the press has been inundated with all sorts of opinions and comments both supportive and critical. Some question Smith’s motives; others question Goldman’s motives in attacking him. Few address Greg Smith’s central point ? that Goldman puts its own interests […]

Investor Protection As Political Football


The House Financial Services Committee under Republican Chairman Spencer Bachus rejected a proposal to increase the SEC’s budget by 18.5 percent to $1.56 billion to pressure the SEC to back down on its recommendation to impose a fiduciary duty standard on broker-dealers. Congressional Republicans tried to justify their rejection of the needed funding by pointing […]

Goldman Sachs’ Rich Tradition Of Putting Its ‘Muppets’ Last


William D. Cohan is skeptical of Greg Smith’s claim that he only recently discovered that Goldman Sachs put its own interests ahead of its clients. Goldman, Cohan says, has a 143 year history of duping clients, and Smith, if he is to be believed, just did not use his Stanford education to check the publicly […]

Goldman Executive Resigns Over “Morally Bankrupt” Culture At Goldman Sachs


Greg Smith, a twelve-year veteran of Goldman Sachs, who had previously appeared on one of Goldman’s recruiting videos, resigned recently. He said he was leaving because the “put-the-client’s-interest-first” culture that had attracted him and held the firm together for 140-plus years had been replaced by a predatory “make-the-firm-money-by-ripping-off-clients” culture. The culture changed as result of […]

Financial Advisers Owe Special Duties to Clients with Diminished Mental Capacity


Investment advisers face legal liability if they fail to exercise special care in dealing with clients who have diminished mental capacity, such as those with Alzheimer’s disease. They need to have reasonable procedures in place to deal with it, and they need to document every step in the process of implementing such a plan in […]

Concerns Over Unauthorized Trading Increase


The Securities and Exchange Commission has issued an alert warning firms about their supervisory obligations with regard to unauthorized trading by brokers and advisors in customers’ accounts. The SEC’s alert provides guidance to firms in preventing and detecting unauthorized trading. InvestmentNews calls the SEC’s alert a “scoundrel alert” (“Scoundrel alert: SEC warns firms about policing […]