Category: Investment Advisors

I am not immune to cold calls. Note to Joseph Gunnar, stop calling me.

I’ve been getting cold calls lately. I don’t know what list I got on, but they’re a pain in the neck. First of all, it’s never a large wirehouse broker who calls. It’s always some guy with a New York accent. I have nothing against New York. I went to school there. I worked there. Some of my oldest and dearest friends are in New York. But the accent is the first tip.

The second tip is the following statement “It’s been a while since we last talked…” Stop right there. We never talked. I am not a moron. I remember who I talk to. And I know I didn’t talk to some guy like you in any recent memory. Because you would have remembered better than I. I am not pleasant to these guys. They annoy me, these cold call cowboys.

Today, I received a call from Kevin at Joseph Gunnar. (I see they have a person named Joseph there. I wonder if they have anyone named Gunnar.)

He starts with how it’s been a while since we talked. I told him, we’ve never talked. He says “Sure we did, when you were with John Thomas.” Of course, I’ve never done business with John Thomas, which has recently been in the news. So I tell him that we don’t know each other and have never spoken.

Then I ask him my favorite question – “Do you know who I am?” So this nitwit says “Sure, you’re Marc Dobin.” I then ask him if he bothered to look me up on Google to see who I am. It’s not hard to find me. I tell him to bring me up on Google and I will be happy to explain to him how many regulations he violated just during the brief conversation we had. I told him, not so politely, not to call me again. I noticed on my phone records that they have called my office before and I don’t want them bothering me any more. I told him that I would sue his firm for continuing to call me after I tell him to stop.

It’s been a few hours, but I’ll bet they’ll call again.

I noticed from my phone logs that I am getting regular calls from John Carris Investments in New York. I wonder what they could want.

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

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Being a broker means that you can say “I am Sorry” – Dow Jones Video

I was quoted in a recent article on Dow Jones Wealth Adviser about whether or not a broker should apologize. My answer, just like one might expect from a lawyer, “It depends.”

If you’re sorry you’re late returning a call, say it. If you’re sorry the account statement has an incorrect address, say it.

On the other hand, if you’re sorry that your research department’s report was wrong, keep it to yourself. If you’re sorry that a recommendation you made declined in value, “sorry” is best left unsaid.

Here’s a video by the reporter (a short ad might run before the video):

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

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FINRA looking at broker incentives, again.

For as long as I’ve been involved in the brokerage business, brokers have had financial incentives. There are commissions, management fees, bonuses, trips to islands, one time there was even a contest that gave out nearly 100 leases on Porsche sports cars. FINRA knows this goes on.

Suzanne Barlyn reports that FINRA is looking at incentives again. Give me a break.

This really is the equivalent of the piano player at a bordello saying “you mean there’s women upstairs?” or words to that effect. FINRA knows this is going on. I remember going to an SIA (the predecessor to SIFMA) conference where the chair of the SEC said that recruiting bonuses were bad because they weren’t disclosed to customers. This was like 15 years ago!

FINRA is just getting around to looking at recruiting bonuses? I would say that 30-40% of all arbitration awards are for promissory note cases. And FINRA is just now noticing? Spare me.

I will be stunned if FINRA does anything because they won’t be able to figure out how to draw the line. Will it be when a broker gets a higher payout than grid? A forgivable loan? Expense account money? FINRA won’t be able to figure it out and the firms certainly aren’t going to help. But I doubt very seriously that FINRA is going to require a broker to disclose the terms of their employment with their new employer. I just don’t see it.

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

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FINRA sanctions brokerage firm for taking too much customer information.

There is now apparently a difference between taking customer information and taking too much customer information. Since I joined the securities business in 1983, brokers have moved from one firm to another with varying levels of difficulty and information. In the stone age (when we only had copiers), brokers would copy their holding pages (paper forms for those of you unfamiliar with the term) which had a whole host of customer information including social security numbers, birthdays, mother’s maiden name and other minute details of the customer’s life.

Brokerage firms litigated the heck out of the copied information and argued about what was proper and what was improper. Sometimes the firms used Regulation S-P as their weapon. This Regulation governs privacy of customer information. In broker recruiting, Regulation S-P appeared to be honored in its breach.

Along came the Protocol for Broker Recruiting. This changed things. Suddenly, the founders and the adopters of the Protocol agreed that certain limited categories of information were fair game to be moved from one firm to the other. The SEC and FINRA are aware of the Protocol. To describe their enforcement efforts in this area as “rare” would be an understatement.

About 4 years ago, Next Financial was found to have violated Regulation S-P by the SEC. As they say, bad facts make bad law and the facts in that case were pretty outrageous as they were described in the Initial Decision. This case was decided in June 2008 but was underway starting a year earlier. NEXT employees, according to the decision, took a broad range of information from the “losing” firm and also used the other firm’s employees’ usernames and password to access computer systems. Oops.

Fast forward to 2012. FINRA has joined the Regulation S-P game. In a recent decision, FINRA fined a member firm $65,000 for taking customer information and using it to start the account opening process on its own books before the customers had agreed and before the brokers had left their prior firm. FINRA alleges that the firm obtained “nonpublic confidential information included the customers’ social security numbers, account numbers, driver’s license numbers, dates of birth and financial information.” Apparently, names, addresses and phone numbers are fair game, as this is what is allowed by the Protocol, but those numbers, Social Security and Driver’s License, are off-limits.

The ironic part of this is that the questioned activity took place in December 2008, according to FINRA. Apparently this broker-dealer didn’t get the memo.

So what is the takeaway from this? Stick to protocol data. Aside from the fact that it should keep a broker out of hot water, it is also a good time to update all the vitals. Working from 10 year-old suitability information? Update it. Customer remarried and has a new job? Change your data. Maybe you’re a lucky one and your customer won the lottery. Change the financials. Moving is a good chance to do two things: Update customer data and weed out your book. It is not the time to see exactly how much data one can download from the current firm’s system.

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

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Investment Advisor Representatives Face New Public Disclosure

FINRA registered representatives have faced public disclosure for quite a while. In fact, public disclosure, including time before it was on the web, has been around for close to 20 years I think.

Initially, a request was made in writing or by telephone. Then the NASD, as it was known at the time, would print out a report and send a copy to the requestor. The firm and the broker would also receive notification of the request. That has gone by the wayside. Like so many other things, the Internet has changed things.

Now, anyone who’s interested can simply log on to FINRA Brokercheck, follow the instructions and you’ll see what’s available from FINRA. Many states, Florida included, will give a requestor a copy of the broker’s complete CRD record, which is much more thorough. This worked for stockbrokers, but investment advisor representatives were a different animal.

For instance, a broker could lose his/her license and still get a job with an investment advisor. The public customer might not think to look at either the Brokercheck or CRD reports. So the broker might have issues in his/her past that would give the client a reason to move on. But without a coherent reporting system, the client was operating in a vacuum.

Things have now changed. The SEC has significantly upgraded its online disclosure system, which used to be called IARD. It is now called IARD and you, dear reader, can find it here.

Disclosure is good. On the SEC system, one can search by representative name or firm name. The reporting is not perfect, but it is much better and more extensive than it was before. So the next time a good-looking, smooth-talking, salesperson is sitting across your kitchen table pitching his/her firm’s great management abilities, get out your laptop and log on to the IAPD. Maybe you’ll find something that will make you think twice, or at least ask more questions.

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

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