BAC NASD Arb Story

It’s one thing to move to a different firm, but to change firms AND move across country (as a team) is taking some pretty big risks. They must have been promised the moon, to make the move.

A little birdie here in SD told me that the book that they were expecting to bring over was dramatically higher than the reality of what they were able to move...

I agree with DOB- it was a big risk to switch coasts in the primetime of their careers... If they wanted the West Coast so bad they should have all chipped in to buy a house where they could've taken turns vacationing...

Or they should have cut a deal with former equity trader, Bobby McCann, to work out of a Mother MERrill Orange County, CA office during the winter months.

what’s the story?

[quote=ymh_ymh_ymh]

Or they should have cut a deal with former equity trader, Bobby McCann, to work out of a Mother MERrill Orange County, CA office during the winter months.

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With 20/20 hindsight, not a bad plan. OTOH, they wouldn't have picked up the $1.4MM they got to come over, the promised BAC book and who knows what they might have lost of their old book.

It's good to see BAC (or anyone else who plays bait and switch) get pounded for fraud.

3 Merrill brokers from the frozen tundra wanted to relocate to warmer digs (Orange County, CA) so BAC in San Diego made them an offer they couldn't refuse. Things didn't work out. 2 are with Wells Fargo now.

Someone posted an article about it yesterday from Investment News.

I am glad to see BAC get spanked for bait and switch, too.

Registered Rep is kidding themselves by booting my link the other day if they think they are "competition" with the Investment News and that was reason to boot the post.

RR is an advertising sponsored trade magazine and very different than Investment News which is closer to real newspaper. I'm not saying each doesn't have a purpose but they aren't the same at all. 

[quote=ymh_ymh_ymh]

3 Merrill brokers from the frozen tundra wanted to relocate to warmer digs (Orange County, CA) so BAC in San Diego made them an offer they couldn't refuse. Things didn't work out. 2 are with Wells Fargo now.

Someone posted an article about it yesterday from Investment News.

I am glad to see BAC get spanked for bait and switch, too.

I think lying to producers is the great fertile ground to be explored in the soon coming future. If you miss on disclosure agreement to a client you can face lawyers, if an AG find one undisclosed fee on a products the Spitzer machine goes into high gear and it all trickles down to clients and producers to pay.

On the other hand managers lie and cheat on agreements to producers all the time. Banks are a huge target. The pattern is always the same; the growth phase when the promises are made, the critical mass where the promises stop and get redefined and then the cheating phase when the promises get broken and producers have to make hard choices and face losses when changing. The whole time the people in management defame the production element to retain or gain business.

Another reason brokers should have independent licenses and account control similar to the 1940 Act. The 33' "rep" concept is the real reason this all goes on, it should be scraped.

I know a guy who transferred from the Savannah branch to the Podunk branch, a couple hundred miles away, all in-state and within the same firm - his book intact.

Six months later, he switched firms, but stayed in the same city. Since almost all of his book was from coastal Georgia, few of the brokers he left behind could snatch his accounts. Book still intact.

The moral of the story? If you're a broker who wants to move a considerable distance from an area that is home to most/all of your accounts, simply stay with the same firm and transfer to another branch office. (The brokers from your old office are prevented from mooching on your accounts.) Stay there until the dust settles, then make your move to your B/D of choice. The chance of brokers, from your old B/D, mooching the accounts of your clients who live a good distance away, are slim.

Don't get me wrong, the guy is a good broker. I'm just amazed at how much of his original book he was able to retain, with his recent moves.  

DOB,

That post was probably one of the 10 best I have read on this forum. Great advice right there...

I know an ex PRU guy who did that. He moved from Manhattan (Park Avenue office) to Glastonbury, CT with PRU/WB. About 8 months later he accepted a nice upfront offer from StanLEH Morgan. He managed to get 78% of his book/clients to go with him.

I didn't post the link as I figured it would get removed. Anyone who wants to read it can go to Investment News' website and do so.

Good advice Doberman---make the BIG move with the same firm then jump ship 6 months later.

[quote=doberman]

I know a guy who transferred from the Savannah branch to the Podunk branch, a couple hundred miles away, all in-state and within the same firm - his book intact.

Six months later, he switched firms, but stayed in the same city. Since almost all of his book was from coastal Georgia, few of the brokers he left behind could snatch his accounts. Book still intact.

The moral of the story? If you're a broker who wants to move a considerable distance from an area that is home to most/all of your accounts, simply stay with the same firm and transfer to another branch office. (The brokers from your old office are prevented from mooching on your accounts.) Stay there until the dust settles, then make your move to your B/D of choice. The chance of brokers, from your old B/D, mooching the accounts of your clients who live a good distance away, are slim.

Don't get me wrong, the guy is a good broker. I'm just amazed at how much of his original book he was able to retain, with his recent moves.  

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Sound practical logic, not always found on this board. A key thing in the text; "guy is a good broker". That helps.

My point is about the BOA story is that you could be a "good" anything and if senior people lie and manipulate, sometimes in the most minor ways or major ways you suffer and there is little recourse other than courts. The NASDR? 95% on the side of culprits if they work in management and claim it doesn't impact the public. Meanwhile any client related issues gets pushed down to the "rep" to show management is "protecting" the public. Even an unsustantiated "letter" can cause a huge issue to a producer from a client. Meanwhile thousands of routine trade lies are the custom to producers from firms. The basic culture of the industry between producers and management is sub-professional and has plenty to do with the abuses clients experience. As long as there is immunity for management lying in the NASDR system to brokers the sector will continue to decline.

Somewhere near you is an RIA with a marketing model that includes a description of how sleazy and dishonest the NASD system is to gain market share and it's partly accurate. The BOA was a breath of fresh air and should be celebrated on this forum. This is an area that needs the most reform and focus but the power structure will always be focused on dividing producers and clients to justify and enhance management/firm interests.

The problem with the NASD arbitration system and the NYSE one for that matter is the "quality" of arbitrators (mostly over the hill "has been" washed up half senile securities lawyers who couldn't and didn't make it to senior partner at a respectable firm). They're a bunch of "wanna be" judges.

The reason the NASD/NYSE can't get good ones in their prime is the compensation which is intentionally too low to guarantee biased judgments in favor of the broker-dealer and against the broker and/or retail client.

That judgement makes me want to take my bonus and go indy NOW! Lots of broken promises at BAC.

Yep, and BAC's not the only one to "stick" it to producers, either.

Did you read Bruce Kelly's story?

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Yep, and BAC’s not the only one to “stick” it to producers, either.

Did you read Bruce Kelly's story?

[quote=joedabrkr] [quote=ymh_ymh_ymh]

Yep, and BAC's not the only one to "stick" it to producers, either.

Did you read Bruce Kelly's story?

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That bias is generally baked into the employee-advisor model, as Seeker15 has pointed out.  So, it happens in many firms.
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That was civil Joe, I'll take it as a complement.

People who pay all their own expenses shouldn't be trapped in "employment" status based on the twisted compliance scheme from 1933.

The way to improve the sector is eliminate firm supervision of "reps" and go to an individual license system. Firms can provide support but they shouldn't have the exclusive over account custodity which is the central rule abuse driving most issues for advisors. When dealers are forced to really compete for free advisors and producers can control account location the old game will and should be gone. Lying to producers, and thereby the public, will be greatly reduced. It relates directly to the BOA abuse. Doctors at a hospital would never let this sort of thing happen to them.

[quote=ymh_ymh_ymh]

Yep, and BAC's not the only one to "stick" it to producers, either.

Did you read Bruce Kelly's story?

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You mean his BAC story?

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...to guarantee biased judgments in favor of the broker-dealer and against the broker and/or retail client.

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Interesting perspective. From where I sit the retail client has a huge advantage, then the firm. The only person almost 100% assured of losing is the rep.

The way to improve the sector is eliminate firm supervision of “reps” …

How far would you guess a propsal to release firms from their obligation to supervise reps would get with public or the regulators?

[quote=Seeker15]Doctors at a hospital would never let this sort of thing happen to them. [/quote]

My guess is that the public would tell you they think doctors aren't supervised enough.

[quote=mikebutler222][quote=ymh_ymh_ymh]

...to guarantee biased judgments in favor of the broker-dealer and against the broker and/or retail client.

[/quote]

Interesting perspective. From where I sit the retail client has a huge advantage, then the firm. The only person almost 100% assured of losing is the rep.

[quote=joedabrkr] [quote=mikebutler222][quote=ymh_ymh_ymh]

...to guarantee biased judgments in favor of the broker-dealer and against the broker and/or retail client.

[/quote]

Interesting perspective. From where I sit the retail client has a huge advantage, then the firm. The only person almost 100% assured of losing is the rep.

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I sorta that's what yolanda and seeker are saying
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True, aside from the part where I think the client has the advantage over both the broker and the firm.

I wish someone compiled statistics on this.

I would weight it like this:

45% firm

35% client

20% broker (always loses no matter who wins)

[quote=ymh_ymh_ymh]

I wish someone compiled statistics on this.

I would weight it like this:

45% firm

35% client

20% broker (always loses no matter who wins)

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You could be right, but as easy it is for a client to win one of these things, I'd given them 75%. The broker? They're the first to be thrown under the bus by the firm and the first to be lied about by the client.

Agree 100% on that (poor broker, even if the client lied).

I think there are some statistics out there about how many cases actually go to arbitration each quarter and who "wins" if you want to call it that.

If I find a link I will post it.

[quote=ymh_ymh_ymh]

Agree 100% on that (poor broker, even if the client lied).

I think there are some statistics out there about how many cases actually go to arbitration each quarter and who "wins" if you want to call it that.

If I find a link I will post it.

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Thanks, that sounds interesting.

Ask and ye shall receive!

http://www.nasd.com/ArbitrationMediation/NASDDisputeResoluti on/Statistics/index.htm

FD: I am not with the NASD and I hope this link works. Some very interesting stuff here (in my opinion)

[quote=Seeker15]The way to improve the sector is eliminate firm supervision of “reps” …

How far would you guess a propsal to release firms from their obligation to supervise reps would get with public or the regulators?

I'm not making political predictions but pointing out the truth of the matter. Clients would be better off if dealers didn't supervise and it was replaced by professional conduct boards and private independent liability malpractice insurance.

The current system is Orwellian in nature. A product design fails...blame a producer, corruption from the highest office...pass the cost down to the producer and lowest client in cost and on and on. Of course there is a huge margin and layer of waste along with any real supervision responsibility firms perform, the real reason hell will freeze over before producers get a free advisor system. Certainly lawyer like the current deep pocket culture the system represents to abuse as well.

The way to improve the sector is eliminate firm supervision of “reps”

How far would you guess a propsal to release firms from their obligation to supervise reps would get with public or the regulators?

I'm not making political predictions but pointing out the truth of the matter. Clients would be better off if dealers didn't supervise and it was replaced by professional conduct boards and private independent liability malpractice insurance.

Either in politics or practice, I just don't see how a scheme that would obviously lower the level of supervison would improve things for the public. BTW, just imagine what that malpractice insurance would cost......

 A product design fails...blame a producer, corruption from the highest office...pass the cost down to the producer...

There's plenty wrong with our current system, but I can't see those two possibilities high on the list.

 Of course there is a huge margin and layer of waste along with any real supervision responsibility firms perform...

There may be plenty of waste, real and imagined, but supervision is much tighter than what you're suggesting.

, the real reason hell will freeze over before producers get a free advisor system.

The real reason we aren't set up like MDs supervision-wise is that the standards for entry into this field just isn't comparable to that required to be an MD.

Either in politics or practice, I just don't see how a scheme that would obviously lower the level of supervison would improve things for the public. BTW, just imagine what that malpractice insurance would cost......

My point is that when you eliminate the regulatory cartel dealers have with a true license the compliance cost would decline. So would the legal abuses of the big pocket syndrome that the central planning model creates. I don't think consumers end up less protected with less government like machinery and expectations involved. Do you really think the recent build out in the nasdr has made the average client better off the last 5 years on protection? Just the oppposite. 

Central planning under the NASD increases client abuse by creating the beast that needs constant feeding. Who do you think pays these fines? Here's exit Glauber's boast;

Oversaw vigorous enforcement actions to protect investors and restore confidence in the markets, capped by a record $134 million in fines last year.

http://www.nasd.com/PressRoom/NewsReleases/2006NewsReleases/ NASDW_017051

Really, who pays the 134 million in the end? The firms? The perps? No, it's added to client charges or producer costs to a large degree. Not to mention all the excess regulation cost the resolves little and leads to more overhead which leads to more greed, pressure and customer abuse. 

The real reason we aren't set up like MDs supervision-wise is that the standards for entry into this field just isn't comparable to that required to be an MD.

I wasn't comparing myself to a doctors skill and the task isn't brain surgery either. Let's switch to plumbing contractors and ask the same question? The point is the centrally planned NASD does more harm than good at the retail level. It protects the guilty and distributes all damages to the innocent by the socialist expectation that it contains. It's the total cost and excess of the current system that makes it worse for clients, a license would improve conditions and eliminate firm waste which is another burden passed down to clients and producers. A market insurance system would be more fair for the innocent participants also. IMOHO

There may be plenty of waste, real and imagined, but supervision is much tighter than what you're suggesting.

Like the Patriot Act, it's mostly wheel spinning and waste. The total cost of the process is paid by some for the benefit of others in a zero sum result at best, it's often worse than this. The cripple effect in the regulated sector has led to a boom in the less regulated arena; internet, infomercials etc. Go listen to the Cox commission on "senior Abuse" to see how mixed up the leadership is. They can add "I.D. theft, phony oil and gas fraud with higher than fair commissions in a paragraph". You can find a replay at CSPAN, it's shocking events like Enron or market timing can be brought to your doorstep as if more than a tiny percentage could be involved in such excess individually.

If we got right with licenses and freedom costs and the system would improve. Dealer-rep regulation should be optional and sales reps shouldn't be tied to firms who steer a scapegoat system at producers and the publics expense.

I don't think legislators would "buy" placing less responsibility on management and more on the producer for a lot of reasons. The system doesn't work because senior management often "uses" the system as it is now and refuses to back the producer up, even if he or she is right.

I do think legislators "might" consider raising the bar for what constitutes a "qualified" and "disinterested" arbitrator. Ultimately, the responsibility for "disqualifying" an unqualified or biased arbitrator rests with the respondent and his/her lawyer (just like in civil court with a judge and/or jury pool).

There are cover-ups in the medical community, too. It's not a perfect system, either.

If any of you are serious about getting the system changed I would suggest calling and/or sending e-mails to legislators who are on the Senate Banking Committee and/or Judiciary.

The most pro-active US Senators right now for reform are Charles Grassley (R:IA) and Arlen Specter (R:PA). You don't have to be a resident/constiuent of theirs but it helps.

FD: I have discussed a few things with both of these US Senators' staffers as well as one of my US Senator's (Maria Cantwell) directly. They have all been very receptive thus far.

[quote=ymh_ymh_ymh]

I don't think legislators would "buy" placing less responsibility on management and more on the producer for a lot of reasons. The system doesn't work because senior management often "uses" the system as it is now and refuses to back the producer up, even if he or she is right.

I do think legislators "might" consider raising the bar for what constitutes a "qualified" and "disinterested" arbitrator. Ultimately, the responsibility for "disqualifying" an unqualified or biased arbitrator rests with the respondent and his/her lawyer (just like in civil court with a judge and/or jury pool).

There are cover-ups in the medical community, too. It's not a perfect system, either.

If any of you are serious about getting the system changed I would suggest calling and/or sending e-mails to legislators who are on the Senate Banking Committee and/or Judiciary.

The most pro-active US Senators right now for reform are Charles Grassley (R:IA) and Arlen Specter (R:PA). You don't have to be a resident/constiuent of theirs but it helps.

FD: I have discussed a few things with both of these US Senators' staffers as well as one of my US Senator's (Maria Cantwell) directly. They have all been very receptive thus far.

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Thanks, I respect your point of view. I don't think individual licenses away from firms lead to less supervision. It's more about eliminating the labor/management conflicts of interest that run right thought the current system. The reason producers are scapegoats are all the vested interests in maintaining that in the current system. The NASDR issues fines and clients and producers pay them as they are distibuted in the uniform liability structure through the firms.

No system involving people is ever perfect. Lumping 600000 people into one top-down system filled with conflicts could be greatly improved. The reason our costs and risks are higher than they should be has to do with ability of others to just kick in costs and risk into our business at anytime from a firm/regulator/mass system level. If you could private license, similar to the 1940 act, life would be better for all; including clients. There would still be dispute structures and firms could offer a compliance umbrella but the cartel on supervision tied to "employment" should be abolished.