The daily news reinforces my belief that there is something rotten at the core of the financial services industry. I am not discussing old news like Bernie Madoff. Here are some of the items that crossed my desk this week:
1. The SEC charged two brokers in a Smithtown, New York, firm, and a real estate promoter, with fraud. The brokers allegedly sold risky, unregistered stock in real estate ventures to elderly investors who attended "free lunch" seminars. The defendants collected over $12 million from 90 senior citizens by promising them returns of 50%. According to the complaint, the promoter charged excessive fees of over $1 million and helped himself to an interest free loan to buy a personal residence.
2. The New York Times reports that an Intel employee had a ten year history of passing on insider information to the Galleon hedge fund. The founder of the fund, billionaire Raj Rajaratnam, has been indicted for insider trading. Galleon suffered massive redemptions and has an uncertain future.
3. The SEC charged a Merrick, New York, stock broker with fraud for creating and distributing phony press releases to manipulate the prices of public companies. The motive: The broker and his clients purchased the stock of these companies prior to the issuance of the releases and no doubt sold before the companies issued corrections.
4. In a lawsuit filed in Federal Court in Boston, famed mystery writer Patricia Cornwell claimed her investment advisors decimated her personal fortune and abused the trust she gave them by misusing a Power of Attorney to write unauthorized checks.
Whether you are rich or poor, brilliant or in your declining years, a segment of the securities industry sees you as having a bull's-eye painted on your back.
The size of that segment is growing.
Dan Solin is the author of The Smartest Retirement Book You'll Ever Read.
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