SEC overhaul -- Dump Mary Schapiro
The Obama administration is missing the forest for the trees as it focuses on regulatory overhaul of the SEC. While giving the Federal Reserve the power to supervise large financial firms is a step in the right direction, the real problem is Mary Schapiro, the newly appointed Chairman of the SEC.
Ms. Schapiro has spent her career protecting brokerage firms from investors, and thwarting efforts to reform a thoroughly corrupt securities industry.
Ms. Schapiro joined the NASD in 1996 as President of NASD Regulation. She was named its Chairman and CEO in 2006, and remained in that position until her appointment to her present position. In 2007, she led the effort to consolidate the NASD and the NYSE into FINRA. FINRA, like its predecessors, purports to "self regulate" brokerage firms.
During her tenure as the NASD, Ms. Schapiro was a strong advocate of the industry's mandatory arbitration system which routinely re-victimizes investors by denying them redress for broker misconduct.
"Self-regulation" overseen by Ms. Schapiro resulted in the greatest abuses by brokerage firms in history, bringing the world's economies to the brink of total collapse.
Ms. Schapiro's shaky start at the SEC confirms the view that she will do nothing to reign in the insatiable greed of brokers, who continue to plunder the savings of hapless investors.
The irony is that it would be so simple to demonstrate a real commitment to investor rights. Here are some suggestions:
1. Abolish the mandatory arbitration system and give investors back their constitutional rights;
2. Abolish "self regulation" by FINRA, which is a sham. The brokerage industry should be regulated by a governmental authority with the power to do so effectively. The SEC would be the likely agency to do so, with the right leadership;
3. Require brokerage statements to:
(a) Disclose the risk of every portfolio, as measured by standard deviation;
(b) Compare the returns of every portfolio to a portfolio indexed to benchmarks of comparable risk; and
(c) Disclose the "cost equity" of the portfolio, which is the amount the investor must make to break even, after payment of commissions, fees and margin interest.
There is nothing complex or controversial about these proposals. If Ms. Schapiro genuinely had the best interest of investors on her agenda, she could easily implement them.
But that is precisely the problem.
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Great background on her...so she is for SELF REGULATION,,, that is libertarian and is contradictory to a democracy... What i mean is that if she is for self regulation, then she is for self taxation and we should all only pay what we feel like and we know what a disaster that will be...
Barack needs to realize that we have an ENTRENCHED OLIGARCHY WITH NO CONSCIENCE...they are every bit as bad as the Aristocracies in France and Russia......
The SEC has been and is still a disaster.
Before knocking it down and starting all over again with some smart, tough people, let Eliot Spitzer have a go.
Perhaps Obama has her on his fire list? We'll see if by the end of the year or next spring in the upcoming consolidation of the SEC and FTC if Ms. Shapiro retains a job...
Everyone in the industry knows that Mary Shapiro is owned by the brokerage firms. They are the root of the problem. They make crappy, high commission products and sell them to investors. There are tons of conflicts of interest.
Her mission is to protect the big brokerage houses from investors and independent firms. Some of her first actions at SEC were to go after small independents at the behest of the big firms. When the big firms are busted she slaps them with a small fine and lets them go on their way.
Where was she when Madoff went down? I bet she was on his rolodex. Madoff was a big brokerage firm that invented its own brokerage statements. Custody and statements did not match. This should not have been hard to catch. Where are the prosecutions? We all know Maddoff is protecting others.
We need a Spitzer type at SEC to give us a conga line of perps.
We cannot reform the business from within. Mary Shapiro must go!!
Ok Dan, once again, spot on. So the question we all should ask is--if Obama is serious about solving this manufactured economic mess, and if all that you say about her history is true, then why would he appoint her along with Geithner, Summers, and the rest of his Wall Street enablers?
You said it better!
How did Obama come up with such a terrible bunch of candidates that are such Wall Street insiders?
It is NOT just Schapiro that needs to go.
First, let's agree that Glass-Steagall must be reinstated.
Second, compensation for financial advisors is not so simple as fee or salary. Plenty of clients are perfectly content to pay a one-off comission on their rarely traded securities rather than even a 1% management fee on total (non money-market) assets.
Third, mandatory arbitration cuts both ways, but there are at least 3 parties to all transactions. Client and FA are bound by arbitration, but the win-win actor is the brokerage house which both profits from the disputed transaction/s AND can cut-loose the FA who was only following his own firms Buy/Hold/Sell ratings. How about an FA hold-harmless agreement so long as his recommendations match his firms', and expose the firm to the arbitration process?
FInally, empower the SEC, fine. But by all means upgrade the talent. If Madoff et al is to teach us anything, it is that the unregulated are WAY ahead of the regulators. Pay these schlubs A LOT of money to regulate the industry.
The problem with the mandatory arbitration is that the "impartial," arbitrators side with industry 96% of the time.
In the remaining 4% of the cases, the arbitrator is generally never used again by FINRA...
That MAY be a problem, but is not THE problem. As someone whom has been through the arbitratration (and justly prevailed), the virtual immunization of my firm was most troubling. I suppose if the client hadn't been such a d-bag, and a lying one at that, I might have had a problem with the process from the perspective you provided.
How disappointing. All the previous articles made her out to be a tough cop.
Ha, ha, the joke's on us, the American people.
Mr. Solin makes a very good point. Why is the Obama administration not cleaning house in the SEC?
The American people are fed up with these self-serving financial wizards that seem to pop up in every sector of our government. These financial wizards have created a flase reality for themselves, stealing our hard earned money to themselves, and using our government to protect their foul deeds.
Mary Shapiro and her ilk are spineless creatures, they cannot resist the enticement of power and money. They will do everything they can to stay in power, and protect themselves, and their robber barron brethren.
We voted for change, and we expect change. Now.
Kick out all the rich and powerful, and put ordinary citizens in place to protect the interests of all ordinary citizens of this country. The rich have had their chance. Kick them out!
Clean out the SEC now, before it gets worse.
Yes, we can!
Ordinary citizens to run the SEC. Wow. I suppose you can get in there and examine the highly sophisticated computerized trading models of derivatives? Spot irregularities in the trading of the instruments? And using established rules/guidelines, build a case against rogue actors?
Well, dust off the old resume'...
And so what else is new? Obama is a disaster and the change thing as little more than a campaign slogan. In my humble opinion. Meanwhile the real action is as he makes a ruling oligarchy out of the banks and finance industry effectively nullifying the Senate. The House is a bit more challenging as they stand for election every two years.
You think the average mutual-fund investor understands standard deviation risk measurements?
Let's not forget that the standard deviation method of risk management is amongst the fairy mathematics dreamed up by risk-free, tenured professors and applied to investments and the economy -- mathematical formulas and assumptions that don't work in real life.
The broker will persuade his client that he will easily make the "cost equity."
Anyway, you are mixing up brokers with portfolio managers.
How about these solutions:
Do away with commissioned brokers. They aren't necessary. Compensate financial advisors with salaries.
It is the inherent goal and fiduciary duty of a portfolio manager to make the most for his client. Making an up-to-twenty-percent commission on fund profits is anathematic to that principle. All compensation should be covered in the fund management fees, with signed client acknowledgement of the fees -- documented caveat emptor.
Good work. Especially documenting fee agreements. How about upping the ante and require electronic signature PRE-APPROVAL for all fee-generating transactions?
its over. The financial sector and its overlords have won the day. This is almost off everyone's radar . The mismanagement of the whole industry has numbed and dumbed everyone down.
We are wrong and they are right.
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