Posted in: Greedy Brokers |
Last week the chairman of the Securities and Exchange Commission, Mary L. Shapiro, sent a letter to the chief executives of many broker-dealer firms, reminding them of their fiduciary responsibility.
According to Shapiro’s letter, which can be viewed in its entirety here:
Reports suggest some firms are offering substantial inducements to potential registered representatives, including large up-front bonuses and enhanced commissions for sales of investment products. In light of these reports, I want to remind broker-dealer firms and their CEOs of the significant supervisory responsibilities you have under federal securities laws to oversee broker-dealer activities, particularly with respect to sales practices.
Shapiro continues in the letter, encouraging these broker-dealer firm CEO’s – and other supervisors – to vigilantly ensure that brokers carefully consider investor interests.
I don’t believe chief executives should need reminding that conflict of interests among brokers can be detrimental to investors. Shapiro, in her letter, mentioned supervisors’ responsibilities “under the federal securities laws…particularly with respect to sales practices.” Do these supervisors need to be reminded to act on the best interests of clients?
Last month I mentioned the Allen Stanford Ponzi scheme that was eventually discovered by the SEC. Former Stanford employee Leyla Wydler told both FINRA and the SEC that her employers pressured her into selling her customers certain CD’s. She was ignored by both agencies for years until Stanford’s criminal activity came to light.
There have been many other reports of firms offering brokers incentives to sell certain securities, regardless of the brokers’ individual clients.
Hopefully these sorts of broker practices don’t continue in the future, but there is no reason to believe they won’t. Any broker interested in higher commissions will be tempted to sell securities that are simply wrong for their clients.
