Sales Assistant to Financial Consultant

Jun 14, 2005 10:19 pm

I have been a registered sales assistant for a senior vice president a little over a year now and want to progress to FC.  The SVP has told me to come up with a plan and he will help me get started by trying to get rollovers from the 401k and DB accounts he has, but this is while I am doing admin work for him still and these accounts will not be very big - I suppose a good place to start though.  Although I have learned a lot from him I want to grow even more.  What is your opinion on staying with the FC and getting as much experience I can with him or go full force on my own?  I realize there are pros and cons to both decisions.  Also, should I try and stay with the firm or look elsewhere altogether. 

Jun 15, 2005 12:25 am

Not to be rude, but all of these decisions are personal decisions.  Simply do a Ben Franklin close.  Take a piece of paper and draw a line down the middle that separates the paper into halves.  On one half write "Pro", on the other half write "con".  Title each page with your alternatives:  1) stay a registered sales assistant and do the DB rollovers; 2) stay with the firm and jump directly to FC; 3) explore other options outside the firm.

Total up your responses and add additional weight to greater factors.

This should help you make your own decision.

Jun 15, 2005 3:47 pm

Oh great! Thanks!  I never heard how to do that before.(sarcasm)

I know it is a personal decision.  Even when you make a personal decision you ask someone for advice.  Especially someone in the same field as you or possoibly someone has been in the same situation.  Despite what they say, the good thing about advice is you can take it or leave it and when it comes down to it the decision is mine, but advice is nice to hear to help you weigh out the pros and cons. 

Jun 15, 2005 4:06 pm

[quote=rokgurl]I have been a registered sales assistant for a
senior vice president a little over a year now and want to progress to
FC.  The SVP has told me to come up with a plan and he will help
me get started by trying to get rollovers from the 401k and
DB accounts he has, but this is while I am doing admin work for
him still and these accounts will not be very big - I suppose a
good place to start though.  Although I have learned a lot from
him I want to grow even more.  What is your opinion on staying
with the FC and getting as much experience I can with him or go full
force on my own?  I realize there are pros and cons to both
decisions.  Also, should I try and stay with the firm or look
elsewhere altogether.  [/quote]



How old are you?  What is your marital/children status?  What is your education level?



What size city do you work in?  How big a branch are you in now?

Jun 15, 2005 4:10 pm

Assuming you have a good working relationship with your FC now, and it
sounds like you do, I say stay where you are.  I’m assuming that
you’ve discussed this with your branch manager, as the decision will
ultimately be his.



This is a very difficult business to succeed in, as I’m sure you
noticed.  IF you can get a headstart by joining him in a
partnership, at least on some accounts, then do it.  Why start
from scratch if you don’t have to?



Also, if he’s anywhere near retiring in the next ten years, that could be a huge windfall for you.



Be warned that a lot of junior partners often stay in junior status for
a long time.  Sometimes even after the senior partner has ceased
day-to-day activities and effectively retired without officially doing
so.



You didn’t give enough information to give much of an evaluation. 
While you may not be his partner on everything, you could partner on
some smaller accounts, which is what this sounds like.  Again,
that’s a head start you wouldn’t be getting anywhere else.  Even
if you partner on a few smaller accounts, you still can grow on your
own.  Right?



Sounds like a great opportunity to hit the ground running.



If you are happy with the company you’re at, there is no reason to go somewhere else when you could do it there.



I’ve always thought that being a sales assistant is a good way to get
started in the business.  Why more don’t make the jump, especially
considering the lack of females, I don’t know.



Good luck.












Jun 15, 2005 4:21 pm

inquisitive -That is what I was leaning towards.

Put Trader - 26 - married, no kids, bachelors in economics minor business management, los angeles, medium to small size branch (about 30 brokers)

Jun 15, 2005 4:23 pm

[quote=rokgurl]

Oh great! Thanks!  I never heard how to do that before.(sarcasm)

I know it is a personal decision.  Even when you make a personal decision you ask someone for advice.  Especially someone in the same field as you or possoibly someone has been in the same situation.  Despite what they say, the good thing about advice is you can take it or leave it and when it comes down to it the decision is mine, but advice is nice to hear to help you weigh out the pros and cons. 

[/quote]

The inability to make a simple decision regarding your life will not benefit you in dealing with others. 

Nothing is more difficult, and therefore more precious, than to be able to decide.
Author: Napoleon Bonaparte

Jun 15, 2005 6:36 pm

[quote=rokgurl]

Put Trader - 26 - married, no kids, bachelors in
economics minor business management, los angeles, medium to small size
branch (about 30 brokers)

[/quote]



Stay put and ease into production.  Moving from one firm to
another AFTER building a practice is a great way of compensating
yourself for having spent time toiling in the vinyards.



You’re a known entity around the office so others will be more willing to help and all that stuff.



Your clients–and your broker’s clients–know you already and have no reason to “worry” about your changing firms.



You’re still young–as you know I think you’re too young–and there will be plenty of time to capitalize later.



Your husband (I"m assuming the gurl part of your ID means female) will
help keep the family afloat for a year or two while you learn the ropes
and build a book.



In a few years you’ll have a track record that you can sell to another
firm for an attractive “transition package” and be rewarded for having
done it slowly.



Right now you have virtually nothing to offer another firm, but in a few years you very well may.
Jun 15, 2005 7:33 pm

rokgul.  Just some advice from another woman.  You might want to take a look at what the numbers would be at a firm you would go to.  For example I am at RJ.  First year is $4 million in assets and $50,000 income.  Second year $10 million in assets and $150,000 income.  Not easy.  Roughly 25% of the advisors make it.  Oh, you don't make your goals . . . .you are fired.  Just some things to consider.  Do you have a business plan that could meet these goals?  Can you devote a ton of time at this time in your life to building your business?  If not, you may not want to leave the position you are at.

Set a timetable with this FC.  Be good to him.  But state that in 2 years time you would like to be an advisor with at least a $10m book and $150,000 in income.  Ask if he thinks he could help you to build that.  Be specific.

Good luck.  Don't pay attention to the self serving arrogant people in this chat.

Jun 15, 2005 8:46 pm

“You should learn not to make personal remarks” Alice said with some severity; “it’s very rude.”



(whispered, “Who’s making personal remarks now?” the Hatter asked triumphantly.)

Jun 15, 2005 11:19 pm

[quote=Mojo]"You should learn not to make personal remarks" Alice said with some severity; "it's very rude."

(whispered, "Who's making personal remarks now?" the Hatter asked triumphantly.) [/quote]

*grinning like a Cheshire cat*

Jun 15, 2005 11:36 pm

[quote=Mojo]

Fistfull of Forex

 [/quote]



http://www.forexfraud.com/




Jun 15, 2005 11:45 pm

So, you aspire to be operate the highest scoring Forex fraud boiler room?

Jun 15, 2005 11:48 pm

Typo: Operating

Jun 16, 2005 12:59 am

“The question is not what you look at but what you see.” -Thoreau



"Canis timidus vehementius latrat quam mordet." - Curtius Rufus

Jun 16, 2005 1:11 am

“Do Be Do Be Do.”  --Sinatra

Jun 16, 2005 3:02 pm

[quote=rokgurl]I have been a registered sales assistant for a senior vice president a little over a year now and want to progress to FC.  The SVP has told me to come up with a plan and he will help me get started by trying to get rollovers from the 401k and DB accounts he has, but this is while I am doing admin work for him still and these accounts will not be very big  [/quote]

We had a similar situation in our office. SVP took in a junior broker to handle the accounts he couldn't be bothered with. Like you the rookie was a former sales assistant looking for a leg up. About a year into this the SVP walked in and announced that he was moving his family and business to another state. He did not extend an invitation to join him to the JB. When it became apparent that all the accounts were going with the SVP the JB protested. That got nowhere, which is how it goes when trainees go up against big producers. So she threatened a lawsuit to which the manager replied "See ya in court and don't let the door hit you on the way out." With that she was gone.

Realize you are putting your career in the hands of the SVP. What kind of business does he run? How clean is his U-4/5? What's his status within the firm? Is he in the 4th year of a 5 year deal with a history firm jumping? How about is home life? Things OK at home?  Etc etc etc.... How well do you know this guy? Anything that is an issue in his life will become an issue in your life.

There is nothing wrong with getting a leg up to get started in this business but perhaps going out on your own is the best way to go. As harsh as this will sound it's true and that is if you can't make it on your own you don't belong in this business. Today there are trainees who are in their first day of production who will become million dollar producers and they will do it on their own. Are you less talented than they? I doubt it. If you do it yourself you own it and noone other than you can decide your future.

Jun 16, 2005 3:38 pm

[quote=tjc45]




Are you less talented than they? I doubt it. If you do it yourself you own it and noone other than you can decide your future.

[/quote]

First of all, that story is akin to claiming that it rained once in Timbuktu, therefore you're crazy to go there on vacation without rain gear.  Schidt happens--but doing silly things for fear that you might get hit by a meteor is not good mental health.

Starting out as a member of a team is a very efficent way to enter the business--oh sure, you may or may not inherit part (or all) of a huge book but at least you might.

The whine about every issue in your senior partner's life affecting your life is not really true--in fact if he is screwed up in his personal life it's probably more likely that he'll turn business over to a junior partner.  Even if you just get to handle some of his accounts, at least you're talking to people who might decide that you're who they want to stay with if the jerk you're working for decides to walk out on his wife and marry a chipmunk.

When you're under thirty your best bet is to find a mentor to guide you--be satisfied with being a junior in a junior/senior dynamic.  I realize that when you're not yet fully grown it seems like "forever" till Santa comes again--but spending five years as a junior broker can come back and reward you many fold when you're old enough that a year is no longer a significant portion of your entire life.
Jun 16, 2005 6:59 pm

[quote=Put Trader]

[quote=tjc45]




Are you less talented than they? I doubt it. If you do it yourself you own it and noone other than you can decide your future.

[/quote]

First of all, that story is akin to claiming that it rained once in Timbuktu, therefore you're crazy to go there on vacation without rain gear.  Schidt happens--but doing silly things for fear that you might get hit by a meteor is not good mental health.

Starting out as a member of a team is a very efficent way to enter the business--oh sure, you may or may not inherit part (or all) of a huge book but at least you might.

The whine about every issue in your senior partner's life affecting your life is not really true--in fact if he is screwed up in his personal life it's probably more likely that he'll turn business over to a junior partner.  Even if you just get to handle some of his accounts, at least you're talking to people who might decide that you're who they want to stay with if the jerk you're working for decides to walk out on his wife and marry a chipmunk.

When you're under thirty your best bet is to find a mentor to guide you--be satisfied with being a junior in a junior/senior dynamic.  I realize that when you're not yet fully grown it seems like "forever" till Santa comes again--but spending five years as a junior broker can come back and reward you many fold when you're old enough that a year is no longer a significant portion of your entire life.
[/quote]

Having done it the hard way, Put, and succeeded but with much strain and learning from experience, I tend to agree with you completely on this one.

How is it that to become an electician, say in Local 1 working on Broadway, one must first start as an apprentice, then become a journeyman electrician, and so forth, spending years learning from mentors and gaining experience before eventually becoming a Master Electrician.

Meanwhile, in our business, you can interview and get a job, study for 90 days, get your series 7, maybe attend 6 weeks of offsite training, and then be ready to go out and destroy someone's net worth?  I've always wondered why we continue(as an industry) to do things that way.
Jun 16, 2005 7:59 pm

[quote=joedabrkr]



Having done it the hard way, Put, and succeeded but with much strain
and learning from experience, I tend to agree with you completely on
this one.



How is it that to become an electician, say in Local 1 working on
Broadway, one must first start as an apprentice, then become a
journeyman electrician, and so forth, spending years learning from
mentors and gaining experience before eventually becoming a Master
Electrician.



Meanwhile, in our business, you can interview and get a job, study for
90 days, get your series 7, maybe attend 6 weeks of offsite training,
and then be ready to go out and destroy someone’s net worth?  I’ve
always wondered why we continue(as an industry) to do things that way.

[/quote]



The ability to completely wipe out a client is very, very, real–and
those of us who are paid to do everything except hold hands with the
clients worry about it a lot.



Cretins who use signature lines such as “Fist Full of Forex” are sociopathic types who have no problem with scewing somebody.



They take the attitude that when a poor soul is screwed it’s the poor
soul’s fault, and since somebody was going to financially rape them it
might as well be the sociopath.



Damn scary point of view and all too common among those who stumbled
into this business in spite of their criminal records, piss poor
education, do “only enough to get by” philosophy, and all the other
signs of a compliance problem waiting to happen.



Management struggles with ways to defuse the loose cannons. 
Focusing on asset gathering rather than transactions has done a lot to
reduce the industry’s role as defendant–but when morons are wandering
around with Series 7 licenses it’s only a matter of time.

Jun 16, 2005 8:39 pm

[quote=joedabrkr] [quote=Put Trader] [quote=tjc45]


Are you less talented than they? I doubt it. If you do it yourself you own it and noone other than you can decide your future.

[/quote]

First of all, that story is akin to claiming that it rained once in Timbuktu, therefore you're crazy to go there on vacation without rain gear.  Schidt happens--but doing silly things for fear that you might get hit by a meteor is not good mental health.

Starting out as a member of a team is a very efficent way to enter the business--oh sure, you may or may not inherit part (or all) of a huge book but at least you might.

The whine about every issue in your senior partner's life affecting your life is not really true--in fact if he is screwed up in his personal life it's probably more likely that he'll turn business over to a junior partner.  Even if you just get to handle some of his accounts, at least you're talking to people who might decide that you're who they want to stay with if the jerk you're working for decides to walk out on his wife and marry a chipmunk.

When you're under thirty your best bet is to find a mentor to guide you--be satisfied with being a junior in a junior/senior dynamic.  I realize that when you're not yet fully grown it seems like "forever" till Santa comes again--but spending five years as a junior broker can come back and reward you many fold when you're old enough that a year is no longer a significant portion of your entire life.
[/quote]

Having done it the hard way, Put, and succeeded but with much strain and learning from experience, I tend to agree with you completely on this one.

How is it that to become an electician, say in Local 1 working on Broadway, one must first start as an apprentice, then become a journeyman electrician, and so forth, spending years learning from mentors and gaining experience before eventually becoming a Master Electrician.

Meanwhile, in our business, you can interview and get a job, study for 90 days, get your series 7, maybe attend 6 weeks of offsite training, and then be ready to go out and destroy someone's net worth?  I've always wondered why we continue(as an industry) to do things that way.
[/quote]

Any one of us can walk into The Flight Safety school in Vero Beach and be flying people around in jet airliners in less than six months. The electrician thing has more to do with job protection than training. You can't get onto a job site without a union card and you don't get the big money until you pay your dues, both monetary and time. It's about control, not quality of work product.

Mentoring relationships can be a great way to get started. Probably better that the firm match the parties involved. Within the context of this thread however, the firm isn't chosing the mentor. There are many pitfalls to this type of arrangement that could just as easily derail a promising trainee. My advise is no more than encouraging this individual to know all she can know about her future business partner. Her future depends on it.

Put, I've lived in Timbuktu. It's very wet!

Jun 16, 2005 9:02 pm

[quote=tjc45]

Any one of us can walk into The Flight Safety school
in Vero Beach and be flying people around in jet airliners in less than
six months.

[/quote]



Is that right?  I was always under the impression that pilots of
jet airliners had a few hours of experience before they took their
seat, but you’re saying that I’m wrong?
Jun 16, 2005 9:39 pm

Meanwhile, in our business, you can interview and get a job, study for 90 days, get your series 7, maybe attend 6 weeks of offsite training, and then be ready to go out and destroy someone's net worth?  I've always wondered why we continue(as an industry) to do things that way.
[/quote]

I agree, how many people out there did absolutely nothing positive for our clients in our first year of biz?  (be honest, now)  If I would have had a closer relationship with a senior broker, I don't believe I would have make some of the mistakes that most of us have made in the beginning.  Time in this business is a wonderful educator, and if it can be done under the wing of a senior broker, thats all the better.

Jun 16, 2005 9:51 pm

[quote=Put Trader] [quote=tjc45]

Any one of us can walk into The Flight Safety school in Vero Beach and be flying people around in jet airliners in less than six months.

[/quote]

Is that right?  I was always under the impression that pilots of jet airliners had a few hours of experience before they took their seat, but you're saying that I'm wrong?
[/quote]

1,000 hours, minimum, before the small regionals will even interview a pilot for jet training.

Jun 16, 2005 9:56 pm

[quote=Phlyin’ Phule][quote=Put Trader] [quote=tjc45]

Any one of us can walk into The Flight Safety school in Vero Beach and be flying people around in jet airliners in less than six months.

[/quote]

Is that right?  I was always under the impression that pilots of jet airliners had a few hours of experience before they took their seat, but you're saying that I'm wrong?
[/quote]

1,000 hours, minimum, before the small regionals will even interview a pilot for jet training.

[/quote]

Is that 1,000 hours of flying, or 1,000 hours of breathing?
Jun 16, 2005 9:57 pm

Flying IS breathing to a pilot, genius.

Jun 16, 2005 10:01 pm

[quote=Phlyin’ Phule]Flying IS breathing to a pilot, genius.[/quote]



Chill.


Jun 17, 2005 3:54 am

[quote=maybeeeeeeee]

 But state that in 2 years time you would like to be an advisor with at least a $10m book and $150,000 in income.  [/quote]

Wow 10 Million AUM and $150,000 net income - a 1.5 ROA - unless you are doing some major churning, isnt that a bit high?

Jun 17, 2005 4:01 am

[quote=Put Trader] [quote=Phlyin' Phule]Flying IS breathing to a pilot, genius.[/quote]

Chill.

[/quote]

As long as you bray like a jackass you'll be treated like one.

Jun 17, 2005 2:51 pm

[quote=Put Trader] [quote=tjc45]

Any one of us can walk into The Flight Safety school in Vero Beach and be flying people around in jet airliners in less than six months.

[/quote]

Is that right?  I was always under the impression that pilots of jet airliners had a few hours of experience before they took their seat, but you're saying that I'm wrong?
[/quote]

Who am i to say anyone is wrong? If you are under the impression that the people at the controls of the regional jet you are taking to visit me in Timbuktu are old hands then you are merely uniformed. Major airlines have hired pilots with as little as 500 hours and regionals will take any graduate of a decent flight school that can pass their flight test. Their main requirement is turbine time. Many of the flight schools are owned by the regionals. Others have agreements with regionals. Graduating from Flight Safety is as good as a guarantee of a job. It's really not that big a deal. The pilots flying our helicopters for the Army had four weeks to fly solo. If not they go from flight school to ground pounding. Similar time frames for Air force/Navy/Marines. But here's a scary thought. The guy piloting the 40 ton 18 wheeler parked 4 feet off your bumper at 70mph got his license after taking a three week driving course. Then Werner, JB Hunt or Schneider or some other driver slave company gave them another three weeks with a co driver/trainer. Now six weeks after starting and making all of 27 cents a mile, after spending all morning transporting pallets 5 miles between yard A and yard B, you and your family are the only thing between him and a decent day's pay.

As for young brokers damaging clients, I didn't realize that was limited to the domain of the inexperienced. If only it were!  As for me, when i was a pup i sold only tax free bonds. Hard to screw somone with a good tax free. About six months in, another trainee and i came up with a can't miss option strategy that we wanted to unlease on our clients. We took it to our manager who was impressed with our work. He said, let's do on paper first for 30 days and then we'll review the results. Needless to say there was no reason for a review, the paper losses were massive. My manager was wise beyond his years.

Jun 17, 2005 3:48 pm

[quote=tjc45]

As for young brokers damaging clients, I didn’t
realize that was limited to the domain of the inexperienced. If only it
were!  As for me, when i was a pup i sold only tax free
bonds. Hard to screw somone with a good tax free.

[/quote]

The second sleaziest segment of the securities industry are the "Bond Daddies."

It is remarkably easy to screw people with tax free bonds--remarkably easy.
Jun 17, 2005 4:04 pm

[quote=Put Trader] [quote=tjc45]

As for young brokers damaging clients, I didn't realize that was limited to the domain of the inexperienced. If only it were!  As for me, when i was a pup i sold only tax free bonds. Hard to screw somone with a good tax free.

[/quote]

The second sleaziest segment of the securities industry are the "Bond Daddies."

It is remarkably easy to screw people with tax free bonds--remarkably easy.
[/quote]
Jun 17, 2005 4:16 pm

[quote=Put Trader] [quote=tjc45]

As for young brokers damaging clients, I didn't realize that was limited to the domain of the inexperienced. If only it were!  As for me, when i was a pup i sold only tax free bonds. Hard to screw somone with a good tax free.

[/quote]

The second sleaziest segment of the securities industry are the "Bond Daddies."

It is remarkably easy to screw people with tax free bonds--remarkably easy.
[/quote]

I agree! Selling high yield non rated hospital bonds and such to the lambs. Whew, outside of bank brokers slinging annuities at their depositors it just doesn't get much dirtier. Of course I did say good tax free bonds. Not that it matters. And it wasn't the Bond Daddies who screwed people with bonds. I believe that honor went first to Salomon Bros.

Jun 17, 2005 4:43 pm

[quote=tjc45]

And it wasn’t the Bond Daddies who screwed people with bonds. I believe that honor went first to Salomon Bros.

[/quote]



Nah, Sollie came to the table late.  They made world class hogs of
themselves but the legendary Memphis Bond Daddies pre-date Sollie by at
least a decade.



The current Little Rock Bond Bandits are worse than Meyer Blinder ever hoped to be.



We’ll always have the pump and dump types, the Forex types and the Bond
Bandits–and that’s good so the rest of the whores look good by
comparison.
Jun 17, 2005 5:15 pm

[quote=Put Trader] [quote=tjc45]

And it wasn't the Bond Daddies who screwed people with bonds. I believe that honor went first to Salomon Bros.

[/quote]

Nah, Sollie came to the table late.  They made world class hogs of themselves but the legendary Memphis Bond Daddies pre-date Sollie by at least a decade.

The current Little Rock Bond Bandits are worse than Meyer Blinder ever hoped to be.

We'll always have the pump and dump types, the Forex types and the Bond Bandits--and that's good so the rest of the whores look good by comparison.
[/quote]

The Little Rock Bond Bandits? Who are they and who gave them that name?

What is Forex?

Jun 17, 2005 6:10 pm

[quote=tjc45]

The Little Rock Bond Bandits? Who are they and who gave them that name?

What is Forex?

[/quote]

Sometime in the years following WW-II the municipal bond business began to flourish and for reasons that are murkey several firms that specialized in selling munis in the secondary market were created in Memphis.

They preyed on small town banks who had money to plow into bonds, but were too small for the big firms in New York and Chicago to fool with.

The Memphis Bond Daddy filled a need--they serviced these banks.  They also built into their trades some rather extraordinary "chop," but since the Acts of '33 and '34 exempted municipal securities from SEC oversight there was no policing authority.

Overtime the Bond Daddies began to expand their client base to include retail investors--who were sold tax free income regardless of their tax brackets.

In the mid 1970s Congress dictated that the muni business should be cleaned up and the organization known as The Municipal Securities Rulemaking Board was created.  The MSRB writes rules about what is and is not a screw job in the secondary market for municipals.

The MSRB has no enforcement power, and the SEC transferred the policing power to the NASD, but the Bond Daddies did not belong to the NASD because there was no reason to.  Essentially the chief reason a firm joins the NASD is because of an NASD rule that says that an NASD member may only grant selling concessions to other NASD members.

Well, if you're only selling muni bonds what do you care about selling concessions of mutual funds, corporate securities and so forth?  You don't--so don't join the NASD and the rules of the NASD don't apply.

That left regulating these guys to state governments, and Tennessee was very lackadaisical--some believe corrupt--and tended to look the other way.

In 1980 a guy got elected governor in Arkansas and shortly after he was inaugerated one of his biggest contributors suggested that the Bond Daddies over in Memphis might move to Little Rock if they felt their activities would be, let's say, tollerated.

That Governor, never one to miss a chance to accept a political contribution let it be known that as long as he had their support they'd have his--and most of the folks in Memphis packed up and moved a couple of hundred miles west and became the Little Rock Bond Bandits.

They're still there, making contributions as needed.

As for Forex--massive fraud in the area of foreign exchange.  Again operating out there in the gray area where the SEC seems to have exempted something and the NASD has no authority because the practioners of the fraud don't belong to the NASD.

Penny stocks do it by keeping their offerings to less than $5 million--which makes them exempt securities and therefore not subject to SEC rules.

Unfortunately this industry is filled with scam artists like the guy who uses the signature "Fist full of Forex" and the guys who are juiced up on cocaine working at "brokerage houses" that are actually nothing more than a front for crime.

Sadly several of those types are leaving messages on this forum--if you can't tell who they are it's simply because you're not as experienced as I am.  If you're lucky enough to enjoy a long career you'll begin to be able to cut through the BS.
Jun 17, 2005 6:26 pm

[quote=Put Trader] [quote=tjc45]

The Little Rock Bond Bandits? Who are they and who gave them that name?

What is Forex?

[/quote]

Sometime in the years following WW-II the municipal bond business began to flourish and for reasons that are murkey several firms that specialized in selling munis in the secondary market were created in Memphis.

They preyed on small town banks who had money to plow into bonds, but were too small for the big firms in New York and Chicago to fool with.

The Memphis Bond Daddy filled a need--they serviced these banks.  They also built into their trades some rather extraordinary "chop," but since the Acts of '33 and '34 exempted municipal securities from SEC oversight there was no policing authority.

Overtime the Bond Daddies began to expand their client base to include retail investors--who were sold tax free income regardless of their tax brackets.

In the mid 1970s Congress dictated that the muni business should be cleaned up and the organization known as The Municipal Securities Rulemaking Board was created.  The MSRB writes rules about what is and is not a screw job in the secondary market for municipals.

The MSRB has no enforcement power, and the SEC transferred the policing power to the NASD, but the Bond Daddies did not belong to the NASD because there was no reason to.  Essentially the chief reason a firm joins the NASD is because of an NASD rule that says that an NASD member may only grant selling concessions to other NASD members.

Well, if you're only selling muni bonds what do you care about selling concessions of mutual funds, corporate securities and so forth?  You don't--so don't join the NASD and the rules of the NASD don't apply.

That left regulating these guys to state governments, and Tennessee was very lackadaisical--some believe corrupt--and tended to look the other way.

In 1980 a guy got elected governor in Arkansas and shortly after he was inaugerated one of his biggest contributors suggested that the Bond Daddies over in Memphis might move to Little Rock if they felt their activities would be, let's say, tollerated.

That Governor, never one to miss a chance to accept a political contribution let it be known that as long as he had their support they'd have his--and most of the folks in Memphis packed up and moved a couple of hundred miles west and became the Little Rock Bond Bandits.

They're still there, making contributions as needed.

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I thought the Bond Daddies had scattered to the four winds. Interesting!

Aug 11, 2015 7:47 am

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