Outside business activity?

or Register to post new content in the forum

16 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Jun 5, 2005 7:41 pm

Why is that certain business activity is considered a conflict when trying to become registered?

Jun 5, 2005 10:53 pm

Because it is.


Could you be a little more specific?

Jun 5, 2005 11:18 pm

Okay to be more specific say you had a mortgage company.... what's the conflict

Jun 6, 2005 8:03 am

Looking at it from the consumer's perspective now, you don't see any conflict of interest if their securities broker also owned a mortgage company?

Jun 6, 2005 9:45 am

let's take a look at it this way..  your client approaches you, or say you suggest them to refinance.  can you refer them out for someone you have confidence in to handle this, or is there a group within your firm,  that you would use

Jun 6, 2005 10:07 am

The best of both worlds would be is your firm could handle mortgage related activity. ML, for instance, has the abilitiy to issue mortgages to their clients. That allows you as the rep to have 'control' over both sides of the balance sheet. The outstanding mortgage debt counts towards certain goals, and depending on the situation it may free up assets or greater disposeable income to reposition towards accumulation goals, college funding, etc, etc. Of course there may be confilicts of interest, thats why there is heavy compliance regarding these activities....

Jun 6, 2005 10:10 am

Under EITHER scenario, what are you going to say when they invested the money from the refinance with you, the investment blows up (or even underperforms, for that matter), and the client heads directly to the NASD and swears that you talked them into the refi?

Jun 6, 2005 10:21 am

You can show them the diligent notes you have taken regarding the situation, the acknowledgement form you had the foresight to have the client sign regarding the fact that they understand the risk/rewards of the transaction, and the suitability of the investments you recommeded ( in case the securities "blow" up.). I am not saying there isnt risk here, just that the abilitiy to do this business exists. I am also not naive enough to think that just because you have documentation to cover your a$$, you cant get hit.... Thats not the point of this post( to talk about compliance), just that this practice can be done....

Jun 6, 2005 10:33 am

Blarm, I'm not arguing that it can't, or even shouldn't be done.  The question was, unless I'm mistaken, how could there possibly be a perceived conflict of interest that might need reporting.


Jun 6, 2005 11:42 am

so am I correct in saying, this is something that can be done.  It's just risky as far as compliance is concerned

Jun 6, 2005 11:56 am
Mr Magnificent:

so am I correct in saying, this is something that
can be done.  It's just risky as far as compliance is
concerned





Good Gawd, what an attitude.



The NASD can shut down an entire branch office because a single broker is a horses ass about compliance issues.



They do it by declaring that the manager has obviously proven that he or she is incapable of properly supervising.



Even if you don't care that you get suspended, or lose your license, as
a result of such casual attitude it would be great if you'd think about
the others with whom you work and who may need the income they generate
even if you don't.

Jun 6, 2005 12:16 pm
Mr Magnificent:

so am I correct in saying, this is something that can be done.  It's just risky as far as compliance is concerned


If I were your supervisor, the question I'd be asking would be, "If you can't stay busy enough as a securities broker, tell me why I should keep you on?"

Jun 6, 2005 1:47 pm

I hear what you saying....  Just asking questions here.. Just thought it was a good referrel base.

Jun 6, 2005 2:31 pm

"If I were your supervisor, the question I'd be asking would be, "If you can't stay busy enough as a securities broker, tell me why I should keep you on?""


IF your firm has the capabilities to offer lending services, it is a great way to not only further 'penetrate' a household and gain more of the 'wallet' with an existing client, but also to establish a new relationship with someone who may not need, want, or desire your asset managements services at the moment. It is a potential way to get in the door.


A senior FA told me the story of how he met with a prospect with 1.6MM at another firm. The client was happy with his broker, but the FA did manage to provide a better mortgage financing option. That started the relationship, then the FA was proactive in contacting the client monthly and building trust/confidence, and after about 8 months the client transferred in approx. 900K in assets. The FA is confident he will get the remaining 700K within the next year. And he has been referred to a prospect with mortgage needs and over 1MM in IRA's at a regional...Again, the mortgage service is another tool to use in order to help the client, and for us to "get in" and form a new relationship.


Any good manager should realize that activity is key and opening new accounts is #1, and it doesnt truly matter how that is done as long as its done.... From there its up to you to go to work and build upon that start...

Jun 6, 2005 3:50 pm

I'd agree with you blarm, if that was what was being asked.  The question, however, was with regard to the broker owning a mortgage company AND being a broker at the same time.

Jun 6, 2005 4:02 pm
Starka:

I'd agree with you blarm, if that was what was being
asked.  The question, however, was with regard to the broker
owning a mortgage company AND being a broker at the same time.





The problem is not if a broker owns a mortgage company, the problem is if a broker steers clients to a mortgage company.



NYSE/NASD rules require that the broker/dealer approve any activity
that their registered people engage in, including such mundane things
as giving a talk at the Rotary.



The fear in such things as steering to a mortgage company is that it is
assumed that the client cannot separate advice given as a
representative of the B/D and advice given as a fellow traveller.



In Wall Street if it sounds like it might be a compliance concern it is.