August 28, 2010
Dear Sir or Madam,
I just read in the WSJ that the SEC is accepting comments pertaining to standards for brokers, investment advisors, etc.
I am an ivy league grad with a degree in engineering and after 15 years of investing with various brokers in various firms I have finally figured out that these companies do not have my investment interests in mind when they recommend investments to me. The final straw occured in September of 2008 when my investment in Fannie Mae Preferred stock lost 90% of its investment in two months. What I did not know was that Citigroup had released a statement a week before convervatorship that their investment in common and preferred was reduced by 95% in the second quarter- but that's when I purchased them through Citigroups investment arm- Smith Barney- so to me it was obvious that Citigroup had used its investment group to unload these shares on to individuals whose accounts were suitable .
So In my mind - suitability- which has a very large definition- meant losing my investment in two months.
As I mentioed that was the last straw- the first straw lists is numerous. Including the following:
1/ Stock brokers wife being on the board of directors of a pharamaceutical firm that when bankrupt (Sheffield Pharmaceuticals)
2. Unauthorized trade in Sycamore Networks which fortunately I got reversed and cancelled but would have lost $ 15,000 in my Morgan Stanley account if I did not fax my complaint in that Friday night. Later this security and others were included in the iposecuriites class action lawsuit action- I am waiting to recover approximately 1% of my original investment.
3. Got a call out of the blue from my broker at Morgan Stanley encouraging me to sell Yahoo!- I said no- but the next morning- their analyist for Yahoo! was on CNBC touting the company. Other examples followed over the next few years- sell GM a few days before a Kekorian tender offer- sell Ameritrade a few weeks before a special dividend of $3/share was to be paid- etc. etc. I got wise to what was happening and stopped listening to this particular broker at Morgan Stanley.
4. I had to file a complaint against either Citigroup or Federated Investors- I never did find out who was at fault- because I did not receive a $31 montly dividend in my money market accoutn which was being transfered on the day the dividend was supposed to be transfered. BTW I eventually did receive my $31 but noticed a reluctance on the part of the SEC during my interactions with them.
Bascially the way I see it, as an individual investor- the system is rigged against us- class action lawsuits are for lawyers benefits- arbitration probably doesn't work and the suitability rules currently employed don't work either.
So what I see is that a drastic rewrite of the rules of conduct must be made- including more that passing you a piece of paper which says the firm does not have your best interest- it should include advertising- inserts in the monthly statements- a taped recording in which the broker discloses that they might try to either buy something in your account that they think is undervalued or sell you somehting that they think will decrease in value.
But if the democracy is going to work- free markets must be preserved- and these rules have to be rewritten with a team of lawyers large enough to deal with number of lawyers currently employed by these firms whose job is to figure out to get around the rules.
Suitability doesn't work.
Thank you Adam Dinnebeil