Vetting a Stock Broker? Pay Attention to Who’s Supplying the Records

Investors are spending more time checking on the backgrounds of the financial types who pitch for their business, and that — mostly — is a good thing.

The public used a regulatory database to check the records of 14.2 million stockbrokers and advisers last year, according to the Financial Industry Regulatory Authority, known as Finra, a self-regulatory group that’s financed by Wall Street. That’s more than double the 6.7 million searches in 2007, the year before the financial crisis began.

Nothing wrong with investors getting more vigilant, of course. But there are some important caveats about what investors get when they check in with a broker-vetting site.

Finra’s records don’t include lawsuits against brokers that aren’t considered “investment-related.” That means that a lot of brokers who are exposed to the possibility of big judgments have official records that say nothing about that exposure.

And then there’s the issue of the freebie websites popping up to help investors vet brokers. Check the fine print, and you learn that some of those sites get their revenues from advisors who pay to be featured. If you get it for free, and the broker pays to get his or her name in front of you on the site, can it really be investor-friendly?

I took a look at the broker background-checking business in my latest column for Bloomberg View. Read article.

25 Years of Business Dodging the Courts: Happy Anniversary, Folks

It’s happy 25th anniversary to somebody today, but not to you if you’re an investor, a consumer, or an employee who toils outside of the executive suite. On June 8, 1987, the Supreme Court said it was OK for brokerage firms to require customers to give up their rights to court in the event that a broker ripped them off. Instead of open court with public records and annoying reporters who could chronicle the sordid details of abuse of the little guy, investors since then have been stuck in “mandatory arbitration” that’s run by — guess who? — the brokerage industry. Continue reading

Ex-Con Man Says JOBS Law
Makes Guys Like Him Rich

The JOBS Act is a slapdash attempt at securities-law deregulation, plain and simple.

Mark L. Morze knows a good investment opportunity when he sees one, but he hasn’t pursued his fortunes quite the way the rest of us have. Morze, 61, hung his hat for 4 1/2 years at federal prisons in Lompoc and Boron, California, after pleading guilty to two counts of fraud for cooking the books at the infamous carpet-cleaning company ZZZZ Best (ZBSTQ) in the 1980s.

He says he’s baffled that President Barack Obama plans to sign a law today that amounts to an open invitation for fraud. “I wish legislators would consult with people like me before they write something like this,” he says, sounding dead serious about the offer. “I could tell them, ‘I know what your intent was with this wording, but we can get around it so easily, it cracks me up.”’  Read article