A prominent Albuquerque real estate executive used his reputation to defraud about 600 investors in New Mexico and elsewhere out of an estimated $80 million in a Ponzi scheme, the Securities and Exchange Commission alleged in a federal lawsuit.
In the complaint, filed Tuesday, the SEC accused Douglas F. Vaughan of fraud and selling unregistered securities. The SEC obtained a temporary restraining order to stop the scam and freeze Vaughan's assets and those of two companies he founded.
Vaughan and his Vaughan Company Realtors filed for Chapter 11 bankruptcy protection last month.
The SEC seeks unspecified financial penalties and a court order that Vaughan give up gains from the alleged scheme.
Vaughan's attorney, Robert Gorence, said Wednesday he and his client were still reviewing the complaint and the restraining order.
"We have no comments to make other than we look forward, ultimately, to our day in court," Gorence said.
The state Regulation and Licensing Department's Securities Division also has been investigating Vaughan. Superintendent Kelly O'Donnell said last month that investors had contacted the division, concerned over Vaughan offerings.
Saturday, March 27, 2010
Friday, March 26, 2010
Medical Capital Probe Launched
Attorneys for MedCap CEO Sidney M. Field and President Joseph J. “Joey” Lampariello revealed the probe last week in an emergency request to use $150,000 per month in frozen assets for legal bills. U.S. District Judge David O. Carter denied the request, saying there was no emergency.
The Securities and Exchange Commission sued Field and Lampariello last summer, alleging a garden-variety securities fraud: failure to disclose $18.5 million in fees to investors. But the case has mushroomed since then into one of the largest alleged Ponzi schemes in Orange County history.
MedCap provided cash up front to financially troubled hospitals and health-care facilities, secured by the hospitals’ unpaid bills, or receivables. It then sold interests in those receivables to 20,000 investors.
Court-appointed receiver Thomas A. Seaman has reported that the company had $543 million in phony receivables on its books, that it had lost $316 million on supposedly profitable loans and collected $323 million in fees for managing those loans. In addition, it allegedly sold receivables at a markup among the six funds it controlled, using money from newer investors to pay investors in the older funds.
In addition to its money-losing loans, MedCap sank $4.5 million into a 118-foot yacht, the Home Stretch, and $18.1 million into an unreleased movie about a Mexican Little League team, “The Perfect Game,” the receiver said.
The Securities and Exchange Commission sued Field and Lampariello last summer, alleging a garden-variety securities fraud: failure to disclose $18.5 million in fees to investors. But the case has mushroomed since then into one of the largest alleged Ponzi schemes in Orange County history.
MedCap provided cash up front to financially troubled hospitals and health-care facilities, secured by the hospitals’ unpaid bills, or receivables. It then sold interests in those receivables to 20,000 investors.
Court-appointed receiver Thomas A. Seaman has reported that the company had $543 million in phony receivables on its books, that it had lost $316 million on supposedly profitable loans and collected $323 million in fees for managing those loans. In addition, it allegedly sold receivables at a markup among the six funds it controlled, using money from newer investors to pay investors in the older funds.
In addition to its money-losing loans, MedCap sank $4.5 million into a 118-foot yacht, the Home Stretch, and $18.1 million into an unreleased movie about a Mexican Little League team, “The Perfect Game,” the receiver said.
Thursday, March 25, 2010
Credit Suisse Ordered to Pay FINRA Arbitration Award
Credit Suisse Group AG, the biggest bank in Switzerland by market value, was ordered by a U.S. judge to pay STMicroelectronics NV the remainder of a $431 million award over unauthorized investments in auction-rate securities.
The arbitration award, ordered in 2009 by the Financial Industry Regulatory Authority, was affirmed on March 19 by U.S. District Judge Deborah Batts in New York, who cited a “record replete with evidence of Credit Suisse’s fraud.”
“Credit Suisse has grasped unsuccessfully at straws to avoid payment of the arbitration award in this case,” Batts said in the ruling. The unpaid balance is about $354 million, including $23 million in interest, Geneva-based STMicroelectronics said today in a statement.
Europe’s biggest semiconductor maker, which hired Credit Suisse to make investments for the company, accused the bank of investing in risky securities after claiming it would only invest in student loans backed by the U.S. government. STMicroelectronics sued when the value of the securities fell and in February 2009 won an arbitration award before the Washington-based regulator, known as FINRA.
“We respectfully disagree with the court’s decision and are evaluating an appeal,” Alex Biscaro, a spokesman for Zurich-based Credit Suisse, said today in an e-mailed statement.
At least 19 underwriters and broker-dealers were sued in class-action, or group, lawsuits since the $330 billion market for auction-rate securities collapsed in February 2008. Some have been compelled by regulators to buy back billions of dollars of the securities.
The arbitration award, ordered in 2009 by the Financial Industry Regulatory Authority, was affirmed on March 19 by U.S. District Judge Deborah Batts in New York, who cited a “record replete with evidence of Credit Suisse’s fraud.”
“Credit Suisse has grasped unsuccessfully at straws to avoid payment of the arbitration award in this case,” Batts said in the ruling. The unpaid balance is about $354 million, including $23 million in interest, Geneva-based STMicroelectronics said today in a statement.
Europe’s biggest semiconductor maker, which hired Credit Suisse to make investments for the company, accused the bank of investing in risky securities after claiming it would only invest in student loans backed by the U.S. government. STMicroelectronics sued when the value of the securities fell and in February 2009 won an arbitration award before the Washington-based regulator, known as FINRA.
“We respectfully disagree with the court’s decision and are evaluating an appeal,” Alex Biscaro, a spokesman for Zurich-based Credit Suisse, said today in an e-mailed statement.
At least 19 underwriters and broker-dealers were sued in class-action, or group, lawsuits since the $330 billion market for auction-rate securities collapsed in February 2008. Some have been compelled by regulators to buy back billions of dollars of the securities.
Monday, March 22, 2010
More Brokerages Subpoenaed Over Medical Capital and Provident Blow Up
According to an article posted by InvestmentNews, securities regulators are seeking information from six brokerage firms concerning the sales of two private placements that blew up last summer.
The Massachusetts Securities Division is requesting information on due-diligence efforts, suitability data and promotional materials related to the sale of private placements marketed by Medical Capital Holdings Inc. and Provident Royalities LLC, according to the statement.
The regulator has been increasing its scrutiny of sales of private placements by independent broker-dealers. In late January, the Securities Division slapped Securities America Inc. with a lawsuit, alleging that the firm misled investors who were sold high-risk private placements.
Specifically, the agency alleged that Securities America advisers sold $7.2 million in promissory notes to Massachusetts investors without disclosing all the risks involved. That case is pending.
Medical Capital and Provident issued billions in notes and other securities sold by a number of broker-dealers, according to today’s statement.
“It also has become apparent that Securities America Inc. was not the only broker-dealers selling these” private placements, according to the statement.
Mark Goldwasser, CEO of National Securities, said he hadn’t yet seen the subpoena and therefore could not comment.
Officials at the five other broker-dealers were not immediately available for comment.
The Massachusetts Securities Division is requesting information on due-diligence efforts, suitability data and promotional materials related to the sale of private placements marketed by Medical Capital Holdings Inc. and Provident Royalities LLC, according to the statement.
The regulator has been increasing its scrutiny of sales of private placements by independent broker-dealers. In late January, the Securities Division slapped Securities America Inc. with a lawsuit, alleging that the firm misled investors who were sold high-risk private placements.
Specifically, the agency alleged that Securities America advisers sold $7.2 million in promissory notes to Massachusetts investors without disclosing all the risks involved. That case is pending.
Medical Capital and Provident issued billions in notes and other securities sold by a number of broker-dealers, according to today’s statement.
“It also has become apparent that Securities America Inc. was not the only broker-dealers selling these” private placements, according to the statement.
Mark Goldwasser, CEO of National Securities, said he hadn’t yet seen the subpoena and therefore could not comment.
Officials at the five other broker-dealers were not immediately available for comment.
SEC v. Wealth Management
The Commission announced that on March 4, 2010, the Honorable William C. Griesbach of the United States District Court for the Eastern District of Wisconsin entered final judgments against defendants Simone Fevola and Wealth Management LLC and relief defendants WML Gryphon Fund LLC, WML Watch Stone Partners LP, WML L3 LLC, WML Palisade Partners LP, WML Pantera Partners LP, and WML Quetzal Partners LP. The final judgments against Fevola and Wealth Management LLC permanently enjoin them from violating Sections 206(1), 206(2), 206(4) and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the final judgments require Fevola to pay disgorgement of $1.24 million, plus prejudgment interest of $149,567 and Wealth Management LLC to pay $1,322,209 in disgorgement, plus $148,793 in prejudgment interest. Fevola consented to the entry of the final judgment without admitting or denying any of the allegations in the Complaint. The final judgments against Wealth Management LLC and each of the relief defendants were entered by default for failing to answer the Commission's Complaint.
The Commission commenced this action in May 2008 by filing an emergency action charging Wealth Management LLC, an Appleton, Wisconsin investment adviser, James Putman, its founder and Chief Executive Officer, and Fevola, its former President and Chief Investment Officer, for engaging in a kickback scheme and other fraudulent conduct involving six unregistered investment pools they managed. The Complaint alleges that Putman and Fevola each accepted $1.24 million in undisclosed payments derived from investments made by the unregistered investment pools in 2006 and 2007. The Complaint also alleges that Wealth Management, Putman and Fevola misrepresented the safety and stability of the two largest investment pools and placed clients into these investments even though they were inconsistent with some clients' objectives.
The Commission commenced this action in May 2008 by filing an emergency action charging Wealth Management LLC, an Appleton, Wisconsin investment adviser, James Putman, its founder and Chief Executive Officer, and Fevola, its former President and Chief Investment Officer, for engaging in a kickback scheme and other fraudulent conduct involving six unregistered investment pools they managed. The Complaint alleges that Putman and Fevola each accepted $1.24 million in undisclosed payments derived from investments made by the unregistered investment pools in 2006 and 2007. The Complaint also alleges that Wealth Management, Putman and Fevola misrepresented the safety and stability of the two largest investment pools and placed clients into these investments even though they were inconsistent with some clients' objectives.
Thursday, March 18, 2010
Provident Asset Management Expelled for Offering Fraudulent Private Placement Deal
The Financial Industry Regulatory Authority (FINRA) announced today that it has expelled Provident Asset Management, LLC, a Dallas based broker-dealer. The expulsion stems from a series of fraudulent private placement offerings marketed through an affiliate, Provident Royalties, LLC. Some have called the offering a Ponzi scheme, a massive one at that, involving thousands of investors.
The scheme operated for almost three years through 23 series of offerings sold via a network of over 50 retail broker-dealers. Through these offerings and this network of broker-dealers, over $480 million was raised, involving some 7,700 individual investments made by thousands of investors around the country.
Though the move announced by FINRA today will be welcomed by many, it does little to amend the damage done to defrauded investors. Many have turned to FINRA arbitration as a means to recoup their investment loss.
Thursday, March 11, 2010
Reverse Convertibles—Complex Investment Vehicles
Click for entire article
Over the past few years, brokerage firms and banks have been issuing and marketing complex investments known in the industry as "structured products" to individual investors. These include "reverse convertibles," which are popular in part because of the high yields they offer.
Also known as "revertible notes" or "reverse exchangeable securities"—and sold under a variety of proprietary names that may or may not use the term "structured" to describe the product—reverse convertibles are debt obligations of the issuer that are tied to the performance of an unrelated security or basket of securities. Although often described as debt instruments, they are far more complex than a traditional bond and involve elements of options trading. Reverse convertibles expose investors not only to risks traditionally associated with bonds and other fixed income products—such as the risk of issuer default and inflation risk—but also to the additional risks of the unrelated assets, which are often stocks.
FINRA is issuing this alert to inform investors of the features and risks of reverse convertibles. They are complex investments that often involve terms, features and risks that can be difficult for individual investors and investment professionals alike to evaluate. If you are considering a reverse convertible, be prepared to ask your broker or other financial professional lots of questions about the product's risks, features and fees and why it's right for you.
What Is a Reverse Convertible?
A reverse convertible is a structured product that generally consists of a high-yield, short-term note of the issuer that is linked to the performance of an unrelated reference asset—often a single stock but sometimes a basket of stocks, an index or some other asset. The product works like a package of financial instruments that typically has two components:
a debt instrument (usually a note and often called the "wrapper") that pays an above-market coupon (on a monthly or quarterly basis); and
a derivative, in the form of a put option, that gives the issuer the right to repay principal to the investor in the form of a set amount of the underlying asset, rather than cash, if the price of the underlying asset dips below a predetermined price (often referred to as the "knock-in" level).
When you purchase a reverse convertible, you're getting a yield-enhanced bond. You do not own, and do not get to participate in any upside appreciation of, the underlying asset. Instead, in exchange for higher coupon payments during the life of the note, you effectively give the issuer a put option on the underlying asset. You are betting that the value of the underlying asset will remain stable or go up, while the issuer is betting that the price will fall. In the typical best case scenario, if the value of the underlying asset stays above the knock-in level or even rises, you can receive a high coupon for the life of the investment and the return of your full principal in cash. In the worst case, if the value of the underlying asset drops below the knock-in level, the issuer can pay back your principal in the form of the depreciated asset—which means you can wind up losing some, or even all, of your principal (offset only partially by the monthly or quarterly interest payments you received).
A reverse convertible might make sense for an investor who wants a higher stream of current income than is currently available from other bonds or bank products—and who is willing to give up any appreciation in the value of the underlying asset. But, in exchange for these higher yields, investors in these products take on significantly greater risks
Over the past few years, brokerage firms and banks have been issuing and marketing complex investments known in the industry as "structured products" to individual investors. These include "reverse convertibles," which are popular in part because of the high yields they offer.
Also known as "revertible notes" or "reverse exchangeable securities"—and sold under a variety of proprietary names that may or may not use the term "structured" to describe the product—reverse convertibles are debt obligations of the issuer that are tied to the performance of an unrelated security or basket of securities. Although often described as debt instruments, they are far more complex than a traditional bond and involve elements of options trading. Reverse convertibles expose investors not only to risks traditionally associated with bonds and other fixed income products—such as the risk of issuer default and inflation risk—but also to the additional risks of the unrelated assets, which are often stocks.
FINRA is issuing this alert to inform investors of the features and risks of reverse convertibles. They are complex investments that often involve terms, features and risks that can be difficult for individual investors and investment professionals alike to evaluate. If you are considering a reverse convertible, be prepared to ask your broker or other financial professional lots of questions about the product's risks, features and fees and why it's right for you.
What Is a Reverse Convertible?
A reverse convertible is a structured product that generally consists of a high-yield, short-term note of the issuer that is linked to the performance of an unrelated reference asset—often a single stock but sometimes a basket of stocks, an index or some other asset. The product works like a package of financial instruments that typically has two components:
a debt instrument (usually a note and often called the "wrapper") that pays an above-market coupon (on a monthly or quarterly basis); and
a derivative, in the form of a put option, that gives the issuer the right to repay principal to the investor in the form of a set amount of the underlying asset, rather than cash, if the price of the underlying asset dips below a predetermined price (often referred to as the "knock-in" level).
When you purchase a reverse convertible, you're getting a yield-enhanced bond. You do not own, and do not get to participate in any upside appreciation of, the underlying asset. Instead, in exchange for higher coupon payments during the life of the note, you effectively give the issuer a put option on the underlying asset. You are betting that the value of the underlying asset will remain stable or go up, while the issuer is betting that the price will fall. In the typical best case scenario, if the value of the underlying asset stays above the knock-in level or even rises, you can receive a high coupon for the life of the investment and the return of your full principal in cash. In the worst case, if the value of the underlying asset drops below the knock-in level, the issuer can pay back your principal in the form of the depreciated asset—which means you can wind up losing some, or even all, of your principal (offset only partially by the monthly or quarterly interest payments you received).
A reverse convertible might make sense for an investor who wants a higher stream of current income than is currently available from other bonds or bank products—and who is willing to give up any appreciation in the value of the underlying asset. But, in exchange for these higher yields, investors in these products take on significantly greater risks
Friday, March 5, 2010
Hedge Fund Oversight and Transparency
Unlike other investment pools — such as mutual funds — hedge funds typically are structured and operated in a way that allows them and their advisers to qualify for exemptions from certain federal securities laws and regulations, including mandatory registration and disclosure requirements.
Under the existing regulatory structure, the Securities and Exchange Commission and the Commodity Futures Trading Commission can provide direct oversight of registered hedge fund advisers and, along with federal bank regulators, monitor hedge fund-related activities conducted at their regulated entities.
Currently the SEC oversees an estimated 1,991 hedge fund advisers. This includes 49 of the largest U.S. hedge fund advisers, which account for approximately one-third of hedge fund assets under management.
As part of routine inspections, the SEC conducted approximately 321 examinations of registered advisers it believed to be involved with hedge funds. Deficiencies among those groups included: information disclosures, reporting, and filing — i.e. private placement memorandum was outdated; personal trading — i.e. quarterly reports were not filed or filed late for personal trading accounts; and compliance rules — i.e. policies and procedures were inadequate to address compliance risks.
Another important SEC activity is its supervision of regulated securities firms that conduct transaction with hedge funds.
Bank regulators, including the Federal Reserve and the FDIC, monitor hedge fund activities. Their role centers on the management practices of their regulated institutions' interactions with hedge funds as creditors and counterparties. Bank regulators examine the extent to which banks follow sound risk management practices.
Market participants also play an important role in keeping hedge funds in check. Investors, creditors, and counterparties impose market discipline on hedge funds by providing additional funding or better terms to hedge funds that are willing to disclose credible information about the fund's risks and prospective returns. In recent years, hedge fund advisers have taken steps to improve their disclosure practices in hopes of attracting institutional investors with fiduciary responsibilities like pension plans.
Under the existing regulatory structure, the Securities and Exchange Commission and the Commodity Futures Trading Commission can provide direct oversight of registered hedge fund advisers and, along with federal bank regulators, monitor hedge fund-related activities conducted at their regulated entities.
Currently the SEC oversees an estimated 1,991 hedge fund advisers. This includes 49 of the largest U.S. hedge fund advisers, which account for approximately one-third of hedge fund assets under management.
As part of routine inspections, the SEC conducted approximately 321 examinations of registered advisers it believed to be involved with hedge funds. Deficiencies among those groups included: information disclosures, reporting, and filing — i.e. private placement memorandum was outdated; personal trading — i.e. quarterly reports were not filed or filed late for personal trading accounts; and compliance rules — i.e. policies and procedures were inadequate to address compliance risks.
Another important SEC activity is its supervision of regulated securities firms that conduct transaction with hedge funds.
Bank regulators, including the Federal Reserve and the FDIC, monitor hedge fund activities. Their role centers on the management practices of their regulated institutions' interactions with hedge funds as creditors and counterparties. Bank regulators examine the extent to which banks follow sound risk management practices.
Market participants also play an important role in keeping hedge funds in check. Investors, creditors, and counterparties impose market discipline on hedge funds by providing additional funding or better terms to hedge funds that are willing to disclose credible information about the fund's risks and prospective returns. In recent years, hedge fund advisers have taken steps to improve their disclosure practices in hopes of attracting institutional investors with fiduciary responsibilities like pension plans.
Thursday, March 4, 2010
SEC HALTS $14.7 MILLION PONZI SCHEME TARGETING RETIRED BUS DRIVERS
The Securities and Exchange Commission obtained an asset freeze and other emergency relief to halt an ongoing Ponzi scheme targeting retired bus drivers living in the Los Angeles area.
The Commission alleges that Thomas L. Mitchell, ("Mitchell"), through his investment advisory firm Mitchell, Porter & Williams, Inc. ("MPW"), operated two entities, the Adivanala AA Investment Trust (the "AAA Trust") and AB3, Inc., ("AB3"), which collectively raised at least $14.7 million from 82 MPW clients nationwide.
The Commission's complaint alleges that MPW's clients, many of whom are recently retired bus operators, were referred to the firm by former colleagues. According to the complaint, Mitchell met with the clients, and encouraged them to take their retirement pensions as a lump sum payment, rather than a monthly annuity. The complaint alleges that Mitchell advised MPW's clients to invest their retirement money in a promissory note offered by the AAA Trust and AB3. The complaint further alleges that the promissory note offering carried fixed interest returns ranging between 10-15% per year for 3-6 year terms. The complaint alleges that Mitchell made various claims to investors as to how he could generate such large returns, including investing in stocks, bonds, and real estate.
The Commission's complaint, which was filed in federal court in Los Angeles, alleges that, rather than making any actual investments, Mitchell and the other defendants in fact operated a Ponzi scheme, in which new investor money was used to pay interest to existing investors. The complaint alleges that between April 2009 and December 2009, the AAA Trust raised approximately $1.4 million from 6 investors. According to the complaint, $1.1 million of these funds were used to pay interest to existing investors, and another $300,000 was diverted to MPW, which Mitchell used to pay his living expenses. The complaint alleges that during this time, the AAA Trust only invested $32,000 worth of investor funds.
The Commission alleges that Thomas L. Mitchell, ("Mitchell"), through his investment advisory firm Mitchell, Porter & Williams, Inc. ("MPW"), operated two entities, the Adivanala AA Investment Trust (the "AAA Trust") and AB3, Inc., ("AB3"), which collectively raised at least $14.7 million from 82 MPW clients nationwide.
The Commission's complaint alleges that MPW's clients, many of whom are recently retired bus operators, were referred to the firm by former colleagues. According to the complaint, Mitchell met with the clients, and encouraged them to take their retirement pensions as a lump sum payment, rather than a monthly annuity. The complaint alleges that Mitchell advised MPW's clients to invest their retirement money in a promissory note offered by the AAA Trust and AB3. The complaint further alleges that the promissory note offering carried fixed interest returns ranging between 10-15% per year for 3-6 year terms. The complaint alleges that Mitchell made various claims to investors as to how he could generate such large returns, including investing in stocks, bonds, and real estate.
The Commission's complaint, which was filed in federal court in Los Angeles, alleges that, rather than making any actual investments, Mitchell and the other defendants in fact operated a Ponzi scheme, in which new investor money was used to pay interest to existing investors. The complaint alleges that between April 2009 and December 2009, the AAA Trust raised approximately $1.4 million from 6 investors. According to the complaint, $1.1 million of these funds were used to pay interest to existing investors, and another $300,000 was diverted to MPW, which Mitchell used to pay his living expenses. The complaint alleges that during this time, the AAA Trust only invested $32,000 worth of investor funds.
Wednesday, March 3, 2010
Rhonda Breard and Breard & Associates Wealth Management
The firm is investigation potential claims against ING Financial Partners on behalf of former customers of Rhonda Breard and Breard & Associates Wealth Management.
Breard, who was registered with ING Financial Partners until February 10, 2010, is alleged to have vanished along with millions of dollars of her clients' money. Breard was a licensed broker in Arizona, Michigan, Nevada, New Mexico, North Carolina, Oregon, Washington, West Virginia, and Wyoming. It has been reported that securities regulators and other agencies are investigating Breard's practices. A review of Breard's securities license reveals a history of several customer complaints as well as regulatory actions. These are all potential "red flags" under the law. Under NASD Rules, ING Financial Partners was obligated to properly supervise the practices and activities of Breard during the time that she was registered with the firm. Breard had been registered with ING Financial Partners since February of 2002. Accordingly, ING Financial Partners may be liable for failing to supervise Breard's activities and responsible for compensating investors who lost money investing with Breard.
Breard, who was registered with ING Financial Partners until February 10, 2010, is alleged to have vanished along with millions of dollars of her clients' money. Breard was a licensed broker in Arizona, Michigan, Nevada, New Mexico, North Carolina, Oregon, Washington, West Virginia, and Wyoming. It has been reported that securities regulators and other agencies are investigating Breard's practices. A review of Breard's securities license reveals a history of several customer complaints as well as regulatory actions. These are all potential "red flags" under the law. Under NASD Rules, ING Financial Partners was obligated to properly supervise the practices and activities of Breard during the time that she was registered with the firm. Breard had been registered with ING Financial Partners since February of 2002. Accordingly, ING Financial Partners may be liable for failing to supervise Breard's activities and responsible for compensating investors who lost money investing with Breard.
Monday, March 1, 2010
Fiduciary Duty Reform Proposal May Backtrack on Previous Rhetoric
There is speculation this week that Senator Christopher Dodd (D-CT), will introduce new financial reform legislation that fails to create single fiduciary duty for Registered Independent Advisors (RIAs) and Broker-Dealers. This represents an expected 180˚on the subject of fiduciary duty reform in light of intense lobbying efforts by the financial industry.
The provision, rather than create a single standard, calls on the Securities and Exchange Commission (SEC) to conduct a study on regulatory standards in the RIA/Broker-Dealer field, and then propose rules on the issue. The provision was first circulated by Senator Tim Johnson (D-SD), a Banking Committee member, three weeks ago.
Those in the financial industry have heard about the potential of a single fiduciary standard applying to both RIAs and broker-dealers for years, yet such talk has remained just that, talk. As quoted by Investmentnews.com, Knut A. Rostad, Chairman of The Committee for the Fiduciary Standard, had this to say: “Studying this issue is a straw man… [t]here has been so much study that has been done over the past 15 years that the SEC has become a think tank on the issue of fiduciary issues, but the industry needs to explain why these investor protections should not be afforded to their customers.”
It remains to be seen if this proposal will be put forth, but if it is, such a move will undoubtedly signal a softening in the rhetoric of financial industry reform that has been tossed around following the subprime mortgage meltdown of two years past.
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