Saturday, August 22, 2009

Rx for Disclosure - Known, Knowable, Unknown & Unknowable

Chuck says "Talk to Me"
I reply "OK I'll try my best - you too".
"Let's have a two way conversation, some call it dialogue."

Then because I saw your ad I switched my account to your firm then...

When it comes to obtaining CASH in exchange for securities there is a fundamental issue.

Everyone knows what CASH is, it's money, it's currency and it's the ONLY legal tender.

Anything other than currency is not CASH.

There is no doubt there is more and more information collected today than ever before, no doubt financial institutions collect and analyze more information today than ever before; FACT: the estimated annual IT expenditures of the financial services and securities industry is over $360B (not a typo) see link here:

There is no doubt that an increasing share of that amount is devoted to what? Proprietary trading for the house' employee's compensation THEN what's left over the house' shareholders' profit. Public customers are not and are specifically excluded in the chain; Wall St is that great washing machine of obtaining CASH from customers in exchange for securities; yet when it comes to the trading of same the same firms batteries of computer aided trading wring every last fraction (reference hyper speed flash trading news of late) for their own pockets first.

To which this writer has asked which comes first? Public customers' interests or employees / agents and shareholders of the appliance maker? Isn't it all about the "beneficiary"?

When it comes to disclosable information the headline above applies.

When sellers / distributors of investments offer anything for sale; all aspects of the investment's or offering's prospectus, markets, AND ANY changes thereto should be prominently disclosed.
Brokerage firms and advisers have a duty to use care - such care requires initial AND ongoing diligence and investigation upon same.

After all, as many have pointed out this is a free country - to which I say correct; no brokerage firm or adviser is forced or compelled to offer or continue to offer (FOR SALE TO THE PUBLIC) ANY particular investment or service.

What's clear is this: the line needs to be more clear or cleared up as to what's available, offered, solicited, unsolicited.

The reference and inspiration for this piece was the recent Charles Schwab Op-Ed in the Wall St Journal regarding the Auction Rate Securities (ARS) inquiry initiated by David Cuomo, NY Attorney General - see link here.

No comments: