Something your firm does as well?

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Oct 28, 2009 2:13 pm

There was a trade correction for my commissions this month. The full weight of the correction will be deducted from my paycheck; that is to say, not that part of the GDC from which I netted but rather the whole gross commission correction. (FWIW, this correction was not large nor is this a recurring theme for me.)


Please - without flaming my firm or myself - I'm wondering if other firms handle things in this manner. Is this consistent with other firms? All things considered, it seems as if the firm has required me to pay back both what I earned, and what the company earned on this transaction.
Oct 28, 2009 2:22 pm

There was a thread about this topic in the last couple of weeks.  The general consensus was that most, but not all, firms will charge you for your errors. 


The bad thing is that if you would have made a mistake that there was a gain on, then the firm wouldn't have shared that gain with you.  So, you could have screwed something up that needed to be corrected and the firm made $1000 on the deal because of market timing.  They keep it.  But if the very next day you have to correct something else and you lose $1000 because of the market, it's coming out of your paycheck.  Not just the money for the correction, but they'd also take the gross away because you didn't actually earn it.  The system has no memory.
 
Sucks to have to learn those little lessons the hard way.
Oct 28, 2009 2:26 pm

I must have missed that thread.


Mind you, I have absolutely no problem with being charged. I do have a problem with the company benefitting from it ... especially when their slice of the pie is so large to begin with. OTOH, if this is an industry standard ... so be it.
 
Tough lesson indeed.
 
[edit] in retrospect, it makes sense. There needs to be a penalty for making mistakes or people would do such things with impunity.
Oct 28, 2009 2:33 pm
Spaceman Spiff:

There was a thread about this topic in the last couple of weeks.  The general consensus was that most, but not all, firms will charge you for your errors. 


The bad thing is that if you would have made a mistake that there was a gain on, then the firm wouldn't have shared that gain with you.  So, you could have screwed something up that needed to be corrected and the firm made $1000 on the deal because of market timing.  They keep it.  But if the very next day you have to correct something else and you lose $1000 because of the market, it's coming out of your paycheck.  Not just the money for the correction, but they'd also take the gross away because you didn't actually earn it.  The system has no memory.
 
Sucks to have to learn those little lessons the hard way.
 
I think you're missing what he's saying. He made $2,000 gross and they take $2,000 net. They make a 65% PROFIT. It is fcked. There will be a lawsuit on this at some time and I will be in it. And yes, all firms steal from you in this way. In Ca it has been outlawed to charge for errors, so the crooks figured out a way to reduce your grid if you make errors. At least they take gross from gross though. I have no idea how a group in finance ever let this happen and why there hasn't been a lawsuit already!
Oct 28, 2009 2:47 pm

FYI, it is illegal for any firm in the country to charge you for errors that are incurred during the course of normal business.  They can charge back if a trade error erases the trade, but it must be taken back the same way it was given (gross vs net)...

Oct 28, 2009 2:55 pm
shantom1:

FYI, it is illegal for any firm in the country to charge you for errors that are incurred during the course of normal business.  They can charge back if a trade error erases the trade, but it must be taken back the same way it was given (gross vs net)...

 
That's why there will be a lawsuit. That is not the way it's done. I had a blowout at Merrill 3years ago and one at Wachovia last year. Basically told " this is the way we do it."
Oct 28, 2009 3:19 pm

Yep, it was industry standard for a while, but the big players lost their class action suits first- now they are going after the smaller firms.  Any firm still doing it should be shut down for flying blind...

Oct 28, 2009 3:22 pm

Yeah, that's f'd up.  There is no regulatory reason to charge a FA on gross.

Oct 28, 2009 4:04 pm

I'm not misunderstanding.  I know how it works.  Evidently you don't. 


This isn't a net vs gross discussion.  We're talking actual dollars with this one.  Jones didn't make any money on this correction.  They covered their loss.  Here, I'll spell it out for you:
 
Lock enters order for 100 shares of GE @$20.  Jones goes out and purchases 100 shares of GE for him @ $20.  The firm uses it's own capital to buy the shares, so they're out $2000.  Lock then cancels that trade, but the price has gone down to $17.  So, Jones sells those 100 shares back @ $17 and get back $1700.  So, they've spent $2000, but only got back $1700.  That's the loss that Lock is expected to make up for because it's his error.  They would have credited his GDC for the $50 in commissions, but they'll take that back out because he cancelled the order and didn't actually earn the commission.  So commission doesn't come into play in this instance.  It's just a $300 mistake that he has to cover.
 
I know, I know you can argue that they're using his net to cover the loss.  You'd be correct.  But they're not making any money on the deal.  They're covering their loss.  I'm not quite sure how your math works out to a 65% profit for the firm.  That must be good left coast liberal math.  If you can show me how that math works, I'd love to see it.   
 
So, which is worse, the firm stealing from the FA by making them cover the loss on their mistake or the FA stealing from the firm by not having to cover the loss on his mistake?  It sucks, but I don't have a problem with covering a loss on a trade that I screwed up. 
 
FYI, Jones is pretty decent about working with you if the loss is a big one.  The area teams know that   I had a $500 loss one time that they let me split over a couple of months.  So, at least they steal it from you in little pieces.   
Oct 28, 2009 4:27 pm

The way I read it made it seem that he covered the realized loss of the correction + lost the gross commission on the sale (not the net commission).

 
I'm now confused by the original post.
Oct 28, 2009 5:35 pm

At our office, when it was AGE, there was a pool that was created from funds made by mistakes. If the pool was positive and you made a mistake the pool would cover it. Otherwise you had to pay. Still, many times my very awesome manager would just have the office P&L eat it. Now if there is a loss you pay it, period. If there is a gain it goes to the firm. 

Oct 28, 2009 6:55 pm
FYI, Jones is pretty decent about working with you if the loss is a big one.  The area teams know that  I had a $500 loss one time that they let me split over a couple of months.  So, at least they steal it from you in little pieces.   
 
I would question anyone who would be willing to write their firm is decent when you admit  they steal from you. What a commentary on you Spiff...to actually print that you endorse them or think they are ok because they take it back from you in little pieces.
 
I have said it before and I will say it again. Get out of dodge before you risk your reputation and your career. If Jones feels in this era that its okay to take from reps for mistakes that they could catch beforehand (remember you are not the principal taking the oversight responsibility) they don't have the technology or bucks to fix it, they have you and all your cohorts to collectively underwrite the risk.
 
Maybe now that they have saved tens of millions with the UK gone, they can take on another hole in their model. Unless they continue to spend the bucks on growth and you are back to square one. My guess is when it hits them in the pocketbook...they'll change.
Do you ever read your signature at the bottom. Talk about intelligent life...
Oct 28, 2009 7:02 pm

UBS changed policy to the firm eats all errors. (that lawsuit and these pussies scared).

It got so expensive so their slime bag lawyers worked hard for a solution.

They came up with a plan that if your errors (gains and losses) are above a % of your gross for quarter , then the hit your payout. The first hit was at 2% of gross and it hit your net 2% up the absolute value of the errors. Typical back handed pussy UBS

Oct 29, 2009 10:03 am
BigCheese:
FYI, Jones is pretty decent about working with you if the loss is a big one.  The area teams know that  I had a $500 loss one time that they let me split over a couple of months.  So, at least they steal it from you in little pieces.   
 
I would question anyone who would be willing to write their firm is decent when you admit  they steal from you. What a commentary on you Spiff...to actually print that you endorse them or think they are ok because they take it back from you in little pieces.
 
I have said it before and I will say it again. Get out of dodge before you risk your reputation and your career. If Jones feels in this era that its okay to take from reps for mistakes that they could catch beforehand (remember you are not the principal taking the oversight responsibility) they don't have the technology or bucks to fix it, they have you and all your cohorts to collectively underwrite the risk.
 
Maybe now that they have saved tens of millions with the UK gone, they can take on another hole in their model. Unless they continue to spend the bucks on growth and you are back to square one. My guess is when it hits them in the pocketbook...they'll change.
Do you ever read your signature at the bottom. Talk about intelligent life...
 
And I would question anyone who needs emoticons placed in a sentence to recognize a joke.
 
Again, more proof that you're so jaded against ANYTHING I say that you can't even recognize a joke when you read it.  You're truly pitiful.  Just for you, every time from here on out I'll use  when I'm making a sarcastic comment or  when I'm trying to make a joke.  Perhaps then you'll recognize it for what it is. 
 
We've had this conversation before and I'm still not sure I understand what in the world you're talking about.  This is a pretty simple thing to try to understand.  FA makes a trade.  FA has to correct the trade.  Jones is not at fault for the FA having to correct the trade.  But, Jones does have it's own money on the hook for the FA and his client.  So, if the FA screwed something up, then he should pay for it.  I'm not sure what you're expecting Jones to "catch" but they're not mind readers.  I placed a trade this morning for 100 shares of stock for a client.  It was a buy.  How does Jones know if it was really supposed to be a buy or if it was actually supposed to be a sell?  They don't.
 
What era are you talking about?  Is this the era of no responsibilty to fix our own mistakes?  So, was it only in the 1990's that it was OK for the firm to require you to man up for doing something wrong and costing the firm money? 
 
I get it that you think that there is something in our system that could be catching our mistakes, but Jones hasn't spent the money on that project.  Perhaps if you would explain it a little better to me I could put it in the Suggbox so that Jones can fix the system so that nobody in the firm ever makes a mistake on a trade again.  You might want to type slowly since I'm no so intelligent.
Oct 29, 2009 10:24 am

Spiff-

 
I could be wrong, but I thought you had your Series 24. Even if you don't the era of responsibility falls on both the FA and the manager who oversees you. If you don't have safeguards or policies in place (which Jones doesn't) then someone has to take the fall. What I have been trying to get through to you without a lot of success (notice no emoticons) is when you are and employee which clearly you are, you are not liable for mistakes.
 
It doesn't matter whether your are selling clothes or securites and employee is an employee. The laws aren't any specific to any type of business. When Jones pays out millions to Theirman and his cohorts (he's the attorney who sued many firms for a variety of reasons) again they will change.
 
Other firms have band aid approaches to keeping their liability to a certain percentage, I doubt they will continue once the lawsuits start...and they will.
 
And as for intelligent life. I think you have been spending way too much time in St. Louis. It might be time to migrate to one of the coasts to get a little clearer picture of what the world is really like!
Oct 29, 2009 11:31 am

Hard for me to spend time in another place than STL, given that I live here and so does my wife and children. 

 
I do have my 24.  It's been a decade since I took the test and I only have to do CE something like every 3 years.  It's not something I utilize regularly.
 
What safeguards is Jones supposed to have in place?  I guess that's the part that I'm not getting from you.  You keep talking about "safeguards and policies" without defining them.  Therefore, I don't know what you're talking about.  Like I said before, if you'll tell me what you're talking about, I'd be happy to send the suggestions in to Weddle and let him know how we can improve the firm.  I'll even tell him the suggestions were from you. 
Oct 29, 2009 11:42 am
LockEDJ:

There was a trade correction for my commissions this month. The full weight of the correction will be deducted from my paycheck; that is to say, not that part of the GDC from which I netted but rather the whole gross commission correction. (FWIW, this correction was not large nor is this a recurring theme for me.)


Please - without flaming my firm or myself - I'm wondering if other firms handle things in this manner. Is this consistent with other firms? All things considered, it seems as if the firm has required me to pay back both what I earned, and what the company earned on this transaction.
 
This happened to me and I was pissed. We were selling some stocks for an individual. Everything went through just fine, then 3 days later I recieved a wire that I will be deducted $300 from my commissions. Come to find out i placed a trade for one of the stocks using the correct symbol but because they were going through a spinoff (that Jones did not mention ANYWHERE on our system) they sold the stock noting that the customer didn't own it, when they did. Then when they bought it back charged me $300!!! That will get your fired up.
Oct 29, 2009 3:02 pm

There are many stories where the FA's have paid. All I remember was a GP on a nice diversification trip who commented on my concern back then, that only two entities could pay for the mistake. Either the client or the FA.


You don't even have E&O at your firm. They self-insure according to them, what they do is transfer the liability away as much as possible.


Just and FYI, Jones does pay once in a while. I went to arbitration with a deceased client's third generation heir and I was exonerated but Jones paid 54K and the reason... failure to supervise. Jones has a responsibility to adequately supervise and  they are purposely avoiding at your expense, probably because of cost. They will be forced at some point to change and when they do, your 100 share orders will probably be viewed by someone prior to execution, and you may have to substantiate your order somehow (way beyond my comprehension) so those last minute orders before the close my be in jeopardy.


You'll have to post after hours now... Unless you don't have many trades to make.
Oct 29, 2009 4:23 pm

Do you seriously think that a company the size of Jones is going to force me, and the other 11,000 FAs, to substantiate a 100 share order every single time?  Not hardly.  The manpower requirement would be huge.  And unnecessary. 

 
There's a HUGE difference between the arbitration scenario you're talking about and an FA placing an order incorrectly.  You go to arbitration for suitability, not for stupidity.  You go to arbitration because someone thinks you did some illegal or unethical.  People don't take you to arbitration because you bought 1000 shares of T instead of 100 and then corrected it.  It think you're trying to make your point incorrectly.  I'm talking about a procedural error, which isn't an S24 issue.  You're talking about failure to supervise, which is.  Apples to oranges. 
 
As to E&O insurance, Jones is very clear that they carry insurance on themselves, not the FA and if the FA screws something up and the client loses, he will be expected to pay.  They don't make a suggestion as to whether or not we should get it.  They do however say you can get it if you want, but if you get it they expect you make sure the level of care you take with your clients doesn't go down. 
Oct 29, 2009 4:33 pm
Spaceman Spiff:

Do you seriously think that a company the size of Jones is going to force me, and the other 11,000 FAs, to substantiate a 100 share order every single time? Not hardly. The manpower requirement would be huge. And unnecessary.



There's a HUGE difference between the arbitration scenario you're talking about and an FA placing an order incorrectly. You go to arbitration for suitability, not for stupidity. You go to arbitration because someone thinks you did some illegal or unethical. People don't take you to arbitration because you bought 1000 shares of T instead of 100 and then corrected it. It think you're trying to make your point incorrectly. I'm talking about a procedural error, which isn't an S24 issue. You're talking about failure to supervise, which is. Apples to oranges.



As to E&O insurance, Jones is very clear that they carry insurance on themselves, not the FA and if the FA screws something up and the client loses, he will be expected to pay. They don't make a suggestion as to whether or not we should get it. They do however say you can get it if you want, but if you get it they expect you make sure the level of care you take with your clients doesn't go down.





Showing my ignorance... Jones didn't pay for E&O?!?!?



And I'm not even joking that I didn't know that.