Andrew Gluck is a veteran financial reporter and the founder and CEO of Advisor Products Inc., a marketing company serving 1,800 financial advisory firms.| JP Morgan Chase Mutual Fund Sales Scandal Shows SEC Is A Joke At Investor Protection: RIAs Should Rise Up Against The SEC And Be Advocates For Investors |
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| Wednesday, July 04, 2012 01:54 |
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The front page of The New York Times today reveals what a joke SEC regulation and investor protection is.
JP Morgan is accused by former brokers of selling proprietary (“house brand”) mutual funds instead of other funds because advisors got fatter commissions. “Financial advisers say they were encouraged, at times, to favor JPMorgan’s own products even when competitors had better-performing or cheaper options,” reports The Times.
This Website Is For Financial Professionals OnlyToday’s scandal is the exact same crime against investors that Wall Street brokerages were prosecuted for in 2003.
The sales abuses were an open secret then as they are now. (An SEC study, ironically led by Merrill Lynch’s Chairman Daniel Tully, found widespread mutual fund sales practice abuses in 1995.
You fiduciaries ought to be blogging about this madness.
What’s even crazier is that before you could wash the ink off your hands from this morning’s paper, JPMorgan Chase was being probed in yet another scandal, manipulating the electrical power market.
This is happening just a few days after the trading loss racked up (by a former classmate of mine) was estimated to total $9 billion.
To be clear, the SEC is a joke because it’s not created a deterrent to prevent Wall Street brokerages from selling house-brand mutual funds that pay brokers more than other funds, creating an unforgiveable conflict of interest that has screwed investors many decades, and everyone who understand Wall Street knows this.
RIAs should rise up against the SEC and be advocates for investor protection by writing their Congressional representatives and getting membership groups to advocate for investors. That’s what a fiduciary should do.
Advisors must be pro-consumer. Niot just pro-advisor.
Comments (7)...
Andy, what planet are you living on!!!!!
This is FINRA's lack of consumer protection. You're doing this again. http://www.ritholtz.com/blog/wp-content/uploads/2012/07/hategovt.jpg
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July 11, 2012
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It's also the pinnacle of duplicity for those who starve regulatory agencies of funds to actually perform regulatory activities to then castigate those agencies for failing to perform regulatory activities.
http://money.cnn.com/2012/02/10/news/economy/cftc_sec_budget/index.htm Citing Madoff as an example of failure for the SEC in an effort to transfer oversight of RIA's to FINRA is especially audacious given that Madoff was not even overseen by the underfunded SEC until the last couple years before he was exposed, while from the very start of his scam he was FINRA regulated. Bob Veres has it right with this article http://www.financial-planning.com/fp_issues/2012_7/Broker-Dealers-wirehouses-lobbying-position-2679522-1.html?zkPrintable=1&nopagination=1
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July 11, 2012
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The SEC is responsible for making sure FINRA does its job. The buck stops there. In this instance, you';re right that FINRA should have done more. But since it has not, it's the SEC's job to step in. SEC supervises FINRA! SEC is the government. FINRA is not.
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July 11, 2012
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Andy, I have an idea. How about you fire half your staff but sign on 50% more customers, and then tell your staff that they're a joke for not being able to keep up with the workload.
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July 11, 2012
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You don't need much staff to know if firms are committing the same violations over and over again for decades. If you do real stuff, you can do it with a small staff. You should know that. You do it. SEC needs to create a credible deterrent. Nothing complicated. Put a Wall Street CEO in jail.
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July 11, 2012
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The sales only needed to be suitable...sad, but true.