August 29, 2010
SEC,
I am not certain of the differences between an investment adviser and a broker. However, I believe that one gives the advice and the other does the trading activity of the security. I believe that the adviser has the fiduciary duty to protect the assets. That being said, the adviser should have the consent of the beneficial owners and at some point shares in the profits reaped. The investor is also the shareholder. The advisor gives the OK as to trading activity.
Currently, we are in a similar situation where the trustee (Bank) happens to also be an advisor who is acting on our behalf (beneficiaries to an Estate). The Bank, I believe, is also a broker. It uses these different hats at their convenience which makes it difficult for the beneficiaries to know what's going on; especially when the fiduciary is the physical owner of certificates and also the signer on the accounts. In this case, the fiduciary has failed to make required distributions of income and interest to the current beneficiaries, nor preceding beneficiaries. This allows the fiduciary to use the funds to reinvest or to borrow from the trust assets.
There should be regulation on all parties because they are affiliated and/or associated. No regulation on any party causes a break in the chain links. In order to keep an eye on all concerned parties, there has to be regulation on all parties concerned. There are too many complicated instruments being traded and a lack of understanding of them. This leads to suspicious activity and fraudulent schemes.
Sheila Waddell