FINRA and Broker Disciplinary Records

Some people are familiar with FINRA and what is does. For those who are not, FINRA is the regulatory body that oversees brokers. They regulate and enforce security law and maintain a database on all brokers called BrokerCheck. This tool catalogues and reports compliance issues in the broker community. Securities lawyers have long complained that the FINRA arbitration system for consumer complaints encourages investors to take settlements and keep quiet. Up until last year, those settlements often included expungement of the ruling from the BrokerCheck system. Meaning, if a client filed a formal complaint against a broker for wrongdoing and the case was settled in arbitration, it was possible for the event to not be recorded on the broker’s record. This practice has since been banned but still leaves many holes in the process. First, arbitration is a private matter so there is the question about whether or not these deals still happen behind closed doors. Second, many broker still try to expunge their own records. Many of them are successful because the harmed clients, due to lack of time and resource, rarely fight the effort. This means that 88% of brokers that attempt to remove negative rulings from their record are able to do so!
    

DOL Fiduciary Standard

What does a uniform fiduciary standard mean for 2016? As covered in previous posts, the department of labor will likely publish a fiduciary rule in early 2016, forcing the industry (including brokers) to adopt a fiduciary standard over its current suitability standard. In the short term, the focus will largely be on helping advisors adopt the new rules and becoming compliant. Primarily because it’s not possible to fully prepare now, as no one knows exactly how the proposed rule may be changed before it’s published. Still, it is safe to assume that when the rule is released, commission-based brokers will really feel the pressure to shift towards a fee-based model. Either because their firm demands it or because they become RIAs. The pressure for ongoing service in a fee based model will hopefully drive them to adopt a more holistic financial planning approach. However, even in those circumstances, it’s very hard to say if the department of labor rule will completely end the broker model and commissioned based sales model or if it will simply will force it to change in some small ways. Regardless, this is the first of many steps towards a more transparent, client-focused, financial services industry. 

Art Imitates Life

On Friday, January 8th, Sarah Meyohas, an artist, performed at 303 Gallery. Her show was a discussion of financial markets. Included in her performance was trading stocks and affecting a stock’s valuation through said trades, after which she recorded the change with “oil stick.” Such works can be found on her website. She had a lot to say on the New York Stock Exchange and the absurdity that it is itself a company that trades on its own exchange. 

“This line is the performance of the stock, of the exchange, on the exchange.

This line is a self-reflexive existence. It is the stock market subject to its own critical analysis. As the price fluctuates, the stock exchange is valued through the very means of that which is being valued. It is creating its own image, attaining its own concept in self-revelation.”

I don’t really have anything else to add, I just really found this enjoyable reading and I can’t explain why. 

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