The Unbelievable Story of One Broker and Her Firm Fighting to Clean Her Tarnished Record

The brokerage industry works hard to keep customer complaints out of public view, with aggressive firms fighting to remove grievances that sully their brokers’ records. The interminable campaign to sanitize the dossier of former Royal Alliance Associates broker Kathleen J. Tarr is a disheartening case in point. You can read the story here.

How Many Bad Brokers Could There Be? Don’t Play the Percentages

When you consider that 73 percent of financial advisers who get caught engaging in misconduct are still doing business with investors a year later, you could just cross your fingers and hope your broker is one of the good ones.

Better yet, you could leaf through the grim results of a study by three finance professors released earlier this month. They looked at records of 1.2 million people registered with the Financial Industry Regulatory Authority, or Finra, to do business with the public. I wrote about the study in my latest column for TheStreet. You can read it here.

Wall Street Makes It Hard to Dig Up Dirt on Your Broker or Brokerage Firm

The securities industry doesn’t like the idea of reminding investors to check the records of their stock brokers. So when Finra suggested that there be a hyperlink on brokerage firms’ home pages to take customers to its BrokerCheck tool, the industry went on a letter-writing campaign to oppose it.

My personal favorite: The brokerage firm chief compliance officer who told Finra he was worried about “unscrupulous investors.” Yep, you read that right. Here’s my column for TheStreet on Wall Street’s latest anti-investor campaign.

Even Snowden Would Have His Hands Full Cracking Wall Street’s Arbitration Secrets

Say you hire a broker. You start out thinking he or she is terrific, of course, or you wouldn’t have signed up in the first place.

And then they wind up churning your account. Or putting you into mutual funds only because the funds generate high fees — for the broker, not you. Or persuading you to buy high-risk products that have no place in a portfolio like yours.

So you get around to thinking you’d like to sue. Well, tough luck, Mr. or Ms. Investor — you can’t. The day you opened that account, you signed a document saying you’d be willing to give up your right to court, and that you’d instead use Wall Street’s private arbitration system if your broker fleeced you. Welcome to Finra arbitration.

Public-minded politicians have tried for years to get laws passed to ban so-called “mandatory arbitration,” but all their efforts have failed. Wall Street’s lobby is a powerful one. Recently, though, a coalition of consumer groups wrote to a task force of the Financial Industry Regulatory Authority (Finra), which runs Wall Street’s arbitration,  pressing for more disclosures about investigations of Wall Street’s private tribunals.

In my most recent column for TheStreet, I talk about the secrecy that surrounds Finra arbitration. You can read the column here.

 

In Push for Change, Finra Is Opposed by the Wall St. Firms It Regulates

Brokerage firms are up in arms over a proposal by one of their regulators to collect information about customers’ accounts and use it to keep tabs on salespeople.

That may sound like a great idea on the face of it, but the regulator in question, the Financial Industry Regulatory Authority, or Finra, gets its funding from the firms it’s supposed to be regulating. And those firms don’t like the idea of sharing data on their customers’ buys, sells and portfolio positions.

I wrote about the battle between Finra and its members in The New York Times today. Barbara Roper, director of investor protection at the Consumer Federation of America, told me that Finra’s proposal to get monthly data about activity in investors’ accounts could go a long way in preventing fraud because it would let Finra jump on problems more quickly:

“It creates a real deterrent,” she said. “Who’s going to churn an account if it immediately sends off a warning siren at Finra?”

You can read the story here.

Unfazed by Finra Charges, Seniors Still Swoon for David Lerner Pitch

Elderly investors are looking for yield. And elderly investors are suckers for a free meal. Put the two together and you’ve got a recipe for packing the grand ballroom of a Marriott hotel with 300 sixty- and seventy-somethings who are prime targets for a brokerage firm looking to peddle illiquid investments.

David Lerner Associates, a Syosset, N.Y.-based brokerage firm whose founder was barred from the securities business for a year in 2012, is still out there wooing seniors to break bread at a local hotel and hear the pitch for its investments.

I went to one of those dinners at a Marriott hotel in Trumbull, Conn. in June, and wrote about it in my column tonight for TheStreet Foundation. Prominent in the pitch that night was the firm’s non-traded real-estate investment trust, a highly illiquid investment that I sure wouldn’t want my elderly mom to buy.

What’s stunning is that investors trip over themselves to attend Lerner events despite the firm’s history. From my story:

Finra said in a complaint on May 27, 2011 that Lerner and his firm targeted many “unsophisticated and elderly” clients to sell illiquid non-traded real-estate investment trusts that were concentrated in the hotel industry. The firm used misleading marketing techniques to sell the REITs, Finra said. In the months after the complaint, Finra said Lerner sent letters to 50,000 customers in an attempt to “counter negative press.” And even those letters had “exaggerated, false or misleading statements,” according to an amended Finra complaint on Dec. 13, 2011. The $14 million in fines and restitution against the firm was Finra’s largest monetary sanction of 2012, said Michelle Ong, a Finra spokeswoman.

You can read the story here.

Anworth Mortgage, Your Greed is Showing

“Do your homework” sounds like reasonable enough advice when you’re leafing through a personal finance magazine or listening to the babble of the talking heads on a financial show. But is it practical?

In my story today for TheStreet Foundation, I write about a publicly traded real-estate investment trust, Anworth Mortgage Asset Corp. Its shareholders will vote at the company’s annual meeting today to determine whether the current board will be ousted in favor of a group proposed by activist investor Arthur Lipson.

I’m not so interested in the pyrotechnics of the fight itself. I’m just wondering if there’s any way that a shareholder without a private investigator’s license could possibly understand the far-flung activities of Anworth management without quitting their day jobs. From my story:

A thorough vetting of the company’s officials would take an investor from Anworth’s standard filings with the Securities & Exchange Commission to a hodge-podge of regulatory documents that occasionally outline mishandling of investor money by stock brokers who worked for a brokerage firm controlled by the CEO.

We really ought to stop giving the public the impression that if they just took the time to read an annual report, or a prospectus, or whatever, that they can take control of their portfolio and stay on top of things.

It’s my first column as founding journalism fellow at TheStreet Foundation, and I’m looking forward to producing more. You can read the column here.