UBS forcing out more producers, encouraging expensive financial plans.

OnWallStreet reports that UBS is tinkering with its payout structure. This is not good news for employees or investors.

First, brokers will be paid a 50% payout on financial plans costing $1,000 or more. Huh? There better be some gold plating given with that plan. I would love to see exactly how much work goes into that “plan”. Further, the broker will also get a credit of $250 towards an expense account. So out of the $1,000, the firm is getting $250. That should tell you how much the plan is really worth. UBS is quoted as saying that the average plan costs $4,000. For what?

Most telling, however, is this statement – “Since the firm implemented a plan this year that pays advisors 50% of all financial plans that cost over $1,000, the number of advisors charging for financial plans has tripled.” Does anyone remember when limited partnerships were paying 8% and they were suddenly the hot item? Annuities and other such products have taken their place in the high-payout category. And UBS doesn’t seem to be concerned that they’re seeing increased revenues from financial plans immediately after raising the payout to 50%.

Second, UBS is creating a larger “penalty box”. This is where brokers that the firm considers disposable are placed. They are brokers with 8 or more years of experience whose production is below what the firm considers attractive. UBS’ minimum to hit the graduated grid, instead of a flat 20% payout, is $325,000 for 2014 and will increase to $350,000 in 2015. Really? Is your overhead so high that you can’t afford to pay more than 5 or 6,000 dollars a month on this kind of revenue? The good news for brokers who consistently do this kind of production is that there are many firms out there who would be happy to give you an office and a transitional compensation check.

What the firms really want, though, is for the broker to leave and for the book to stay. Then they get to keep the revenue without having to support another broker. When the penalty box concept first started, the minimums that I was seeing were $250,000. And they were generally implemented when a firm was trying to clean house.

Finally, the firm is discouraging small households — clients whose assets are less than $100,000. When I started in the brokerage business in 1983, I had $2,500 to invest. It went into a high yield municipal bond fund (don’t ask). I got an account statement and I had a broker. And my account grew in value as I deposited more funds in it and did more business. And I remained a client of the firm for 10 years.

So the large firms are essentially giving up on developing clients from the start. They want the people who are already wealthy, in their opinion. Pretty short-sighted, in my opinion. But what do I know, I’m just a lawyer.

That’s the view of one lawyer from Jupiter, Florida. I’m Marc Dobin.

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Leave this earth better than when you got here.

An old friend, I’ll call him David (because that’s his real name and I don’t think he’s embarrassed to know me) called me last night. He was on the way home from the wake for a lawyer we both knew, Joe Generelli. Joe had been around this business for years. His paths and mine never intersected, they only get near each other. I had very few dealings but Joe had a great reputation.

David and I have known each other for more than 25 years. We have kids that are almost the same age. We are growing old together along with a lot of other lawyers in this business. It’s pretty neat that we’ve all gotten respectable jobs, except maybe me, as time passed. The lawyers I count as mentors all went on to form law firms, serve as general counsels at companies and become generally well-regarded members of the bar. Some of them even were that way when I met them. But my friends and mentors all had a hand in turning me into what I am today. (There are some who regret that on occasion.)

It got me thinking this morning, as I was stuck in traffic headed to Fort Lauderdale, about how we should measure our existence. None of us are getting any younger and every once in a while it’s good to take stock of our lives. Overall, things are pretty good.

I’ve been married for 31 years — to the same long-suffering woman. Many of my readers (all 6 of them) know her. We work together and have done so for most of the last 15 years. I have a neat law practice that, on most days, makes me happy and glad to be a lawyer. It wasn’t easy to get here, and much of it was happenstance, but at the end of the day, the practice of law suits me and it appears to suit most of my friends who are lawyers. I’ve been practicing for over 27 years and I’m proud to say it.

In my career, I have handled some neat cases. I’ve met some neat people. I’ve even gotten some results that made a difference in my clients’ lives. It doesn’t happen all the time, but every once in a while the stars align and, boom, things go just right. 10 years ago, my former partner and I got a wonderful result for a couple that thought they had no hope. What a rewarding experience that was. Fast forward to this year and I am proud of the result we got for a client against Morgan Stanley. There are times where we really do, in a big way, what I told my kids we do — help people with their problems.

I have a two lawyer practice in a beautiful town in a lovely state. On good days, I ride my motorcycle the 3 miles to work. It’s a recent acquisition and makes the short drive very enjoyable. I have a nice mix of work and an overall really good group of clients. One of them even decided to hire me because he read my blog (for you naysayers out there). I try a few cases a year. The days of week after week of hearings in different cities are gone. They are a younger lawyer’s game.

When I leave this earth, I want those that remain to feel like I left the earth a little better than when I arrived. Because when we get called to wherever we go when the old ticker gives out, you don’t get any more do-overs. I try to be a good mentor to the lawyers I work with. I try to be as courteous as I can muster to those people who annoy the heck out of me. Sometimes it doesn’t work, I must admit. But I’m starting to feel my mortality as my friends and acquaintances get sick or disappear and I want to make sure that I did something other than breathe someone else’s air.

So, Joe G., we didn’t really get a chance to work together. That’s my loss by all accounts. But I heard that you got a quite a showing at your wake. Most of the old guard was there from your Hutton, Pru and UBS days. They will all raise a glass in your honor, I’m sure, at the SIFMA conference next spring. Good for you, leaving the earth a little better.

Enough rambling for one day. I’m Marc Dobin.

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Jerry or Gerry From EJ Sterling, Inc. – Welcome to the Cold Caller List

Got a call from 370666149, which is not a real phone number. The person shouting at me at the other end of the phone was “Jerry” or “Gerry” an alleged stockbroker from EJ Sterling, Inc. He talked very fast and very loud.

Here’s a brief summary of my conversation with him. I asked him for his last name. He asked me how much money I had in the market. I asked him again for his last name. He asked me who managed my 401K monies. I asked him again for his last name. He asked me if I have ever opened an account over the phone. I thought there was a problem with the phone. He didn’t seem to be hearing my question. Was he embarrassed by his last name?

I told him that he knew my name, why won’t he give me his? I asked him if he was registered. He said yes. Of course, I have no way of knowing this is true since I don’t know his last name. He never gave me his last name. Do people really open accounts with these yahoos?

When I get his last name, I will look him up on Brokercheck..

In the meantime, here’s a lesson. FINRA Rule 3230(d)(4) states, in pertinent part, “A member or person associated with a member making an outbound telephone call must provide the called party with the name of the individual caller, the name of the member, an address or telephone number at which the member may be contacted…” He wouldn’t give me his last name, so that’s strike one.

FINRA Rule 3230(g) requires that his caller ID information be accurate. It wasn’t. That’s strike two.

There appears to only be one person who would use the nickname Gerry at EJ Sterling in New York. But since I don’t know if it was him, I won’t name him. The guy I found has worked at a variety of low-end firms before landing at EJ Sterling. Like cockroaches, these guys just keep on surviving.

The EJ Sterling website says that they have an A+ rating from the Better Business Bureau. What they have done is gamed the system. They have four recent complaints. Three of them are complaints by members of the public who want them to stop calling. The fourth is by someone who apparently fell for their pitch then wised up, refusing to open an account. This person complained that the EJ Sterling representative kept calling trying to get the paperwork for the account.

So they get their A+ by being jerks to the general public then saying I’m sorry. Interesting business model…

If there isn’t a FINRA rule about giving out one’s full and legal name, there should be.

I’m just speechless and I’m Marc Dobin.

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The FINRA All Public Arbitration Panel Revisited

Two months ago, I wrote a post about FINRA All-Public panels and how they don’t seem to make a difference. FINRA has released its statistics through September 2013 here. Guess what? Nothing has changed.

The number of cases decided by both classes of panels has increased. The Majority-Public panel award percentage has held steady at 41% finding for Claimant. The All-Public panels have moved from 42% to 43%. This is insignificant given the number of cases decided. In fact, with the new numbers, if only one more case had been decided in favor of the Respondent, the numbers would be virtually indistinguishable.

So what does this mean? I’m not sure. One thing I take away from it is that I don’t put a lot of stock in all the hand-wringing about arbitration panels being a stacked deck because of the industry panelist. Take away the industry panelist and it looks like the “win” rate is just about the same. So much for the stacked deck.

That’s the “I told you so” view of one arbitration lawyer from lovely Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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A new entrant in the cold call contest – Jack Fitzpatrick from Blackbook Capital

I received a call today from Jack Fitzpatrick from Blackbook Securities. Jack told me that he was following up on a conversation we had on September 30 about a particular company. This was a baldfaced lie. He said the company was in “cloud computing.” Who knows. Who cares?

I didn’t want to spend a lot of time with Jack, but I did tell him that I would add him to the list of cold callers on my blog. I told him that I am a securities lawyer and that I’ve been doing it for 25 years. I’m not sure if he was impressed, stunned or scared. I doubt scared.

I suppose I shouldn’t blame Jack for lying to me. After all, he got his start at John Thomas securities (out of business). He then spent the next two and a half years at Charles Vista LLC. This second employer eventually had its license terminated for failing to pay FINRA arbitration fees, but its problems were bigger than that. Charles Vista had been accused by the SEC of lying to customers about a debenture deal for a start-up waste management company. The accused liar? The firm’s investment banker. This information is all available at the FINRA BrokerCheck website here.

Just one web search, Jack, would have revealed that I was the wrong person to call with your line of BS. But you didn’t do your homework. I was just a name on a list to you. Some poor soul who doesn’t know anything about securities. Perhaps your background of working at Shoprite and Perkins Pancake House did not prepare you for dealing with investors who aren’t just sheep waiting to be sheared. But you did accomplish something today — you have earned an entry in the blog. So, congratulations to you.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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Yet another cold call cowboy, Patrick Rusci

Or as his mother and father called him, Praxedes Russi. Now I am sure that Praxedes is a difficult name to use while cold calling, so I don’t fault him for using Pat, but when I asked him to spell his last name, he spelled it wrong. He started with “Marc, this is Pat Rusci from Legend.”

Of course, I asked him to spell his name and then asked him about Legend, first asking him if it was Legend Securities (from whom I have previously heard) or Legend Equities, the former subsidiary of Waddell & Reed. He said it was Legend Securities and that they were “very, very big.” Not just big, or very big, but very, very big. I asked him how big. He said it again. I asked, like Merrill Lynch big? No, he said, and I wouldn’t want to deal with those guys anyway.

So how big? Never got an answer. But he told me that their main office is on the entire 10th floor of a building on Wall Street. And that it was a whole 8,000 square feet. I was not suitably impressed. He told me they have brokers all across the country. They are neither on the 10th floor (maybe he’s never been there) nor do they have offices all across the country. According to their website, they have 8 offices in New York and New Jersey (plus the very, very, big main office) and one office each in Florida and Indiana. I think he overstated things a bit.

And that’s a shame. Because Praxedes Russi appears to be a fairly clean guy. His Brokercheck report only shows one old complaint from 1999. He does have some questionable firms in his background, but he spent 10 years at Park Avenue Securities, which is owned by Guardian Life Insurance. Even at Park Avenue, I wouldn’t do business with him, but he didn’t know who he was talking to and clearly hadn’t read my blog. Maybe he will now.

We parted ways and I don’t think he’ll be calling back. The source of these calls appears to be a list sold by Dun & Bradstreet. I hope the brokers who are using the list didn’t pay too much for my name.

That’s the anti-cold caller view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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Wells Fargo Advisors brokers “-” changing jobs? Your assets could be at risk.

Do you work at Wells Fargo? Do you have an employment agreement and promissory note? Are you (understandably) thinking about changing jobs? Well, then, you may have a problem if Wells Fargo believes you owe money on the note.

I have been approached by a number of Wells Fargo advisors who have not only received demand letters, but have been told by the firm that their accounts will be liquidated to satisfy the debt Wells Fargo claims. The firm claims there is language in their documents that allows it to do this. And the firm does, in fact, exercise its believed right.

You know what happens? Checks bounce. ACATS requests are rejected. That mortgage payment you set up? It won’t be made. And I believe that Wells Fargo does this with glee.

What happens if Wells Fargo liquidates your account and takes your money? Basically, the only remedy is to file an arbitration to get your account assets back. And it is Wells Fargo’s risk, however minor the firm thinks it is, that the assets in the account don’t go through the roof while the arbitration is pending. But it is likely that the firm doesn’t care, since it wins the overwhelming majority of its promissory note arbitrations. So it feels it can play the bully with impunity.

What can you do to avoid this situation? Spend all your money (just kidding). You should take steps to minimize the assets that Wells Fargo can glom onto. You should consult with a lawyer in your state to find out what Wells Fargo can and cannot do.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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The All-Public FINRA Securities Arbitration Panel – is it any better?

In February 2011, FINRA started allowing claimants to choose an all-public panel in securities arbitrations. I thought it was window-dressing. I did not think that the presence or absence of a non-public arbitrator would make a difference. In 2011, FINRA analyzed 30 cases that went to hearing after the arbitrator selection rule was instituted. Public customers were awarded a “win” 54% of the time with an all-public panel as opposed to 18% in a regular panel. Claimants’ lawyers started beating their chest about how this proved the system was previously rigged against public customers. I was unconvinced. In part this was due to the small sample.

In 2012, the percentage of “wins” in all-public panels had decreased by five percentage points, but the win percentage for mixed panels had increased from 18% to 33%. This was the first full year of analysis. I was still unimpressed. I still felt that cases that go to trial are the difficult ones anyway, so the run-of-the-mill case never sees the light of day. However, the sample was much larger, a total of 210 cases, so I simply had to rely on my gut to say that all-public panels were a sham to make people feel better.

The statistics for 2013 were just released here. Through the end of July 2013, 73 cases were decided by all-public panels and 68 by mixed panels. in the all-public cases, 42% were “wins” for Claimants, although there is no analysis of the size of the award. On the mixed side, 41% were “wins” for customers. Now this is a smaller data set, and it is only a partial year. But if this keeps up, how long will it be before someone from the Claimants’ bar starts complaining that arbitration in general is unfair?

I won’t be surprised to see the statistics remain fairly consistent through the end of the year. Then what do we do?

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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FINRA warns about marijuana stock scams.

This should come as no surprise. A topic is in the news and scammers figure out a way to make a profit, sometimes faster than the actual industry that is the subject of the scam. In this case, FINRA is concerned about scammers touting marijuana stocks, as in investments not inventory. Or maybe inventory, who knows?

In the Investor Alert, FINRA warns about the importance of spotting a potential scam and being circumspect when approached.

Perhaps the humor is only noticed by me, but FINRA warned of one company that was being touted as a wonderful investment. “Yet the company’s balance sheet showed only losses, and the company stated elsewhere that it was only beginning to formulate a business plan.” FINRA says in the Alert. Am I the only one who is not surprised that a marijuana grower has not gotten around to formulating a business plan? Maybe once the grower satisfies its insatiable appetite for Doritos, they’ll get around to it.

Please, people, if it is too good to be true, just walk away or hang up. Unless you’re me and you get cold-called. Then get the name of the broker and the firm, then hang up. Then write a blog post about the broker. But I digress.

That’s the sober view of one Lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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Not great news for Merrill Lynch brokers.

The rumor has been around for a while. Brokers were whispering that Bank of America doesn’t want to own the Merrill Lynch salesforce any more. That the cultures are too different.

Well don’t get your hopes up, people. Bank of America has announced that it is doing away with the parent company, Merrill Lynch & Co., which the bank owns, and will make the broker-dealer, Merrill Lynch Pierce Fenner & Smith, Inc., a direct subsidiary of the bank. OnWallStreet magazine reports that the bank is doing this, in part, to ease reporting.

The bank says it will be business as usual (which, in my view, means that the beatings will continue until morale improves) for the customers and clients. Let’s see, what was business as usual? Oh yeah, cheating (had another word there, thought better of it) brokers out of their FCAAP accounts, that was business as usual. Forcing those brokers to file lawsuits and arbitrations to get the money. That was business as usual. Letting the bank make wrong-headed firing decisions. That was business as usual.

Congratulations, Merrill Lynch brokers, the bank is now one level closer in controlling your life. Aren’t you happy?

That’s the bearish view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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