July 23, 2004
I am a 40 year veteran of the broker-dealer community. My experience includes ten years as a broker and officer of a NYSE member firm, founding and managing my own broker-dealer firm, and ten years as a Managing Director of a NYSE member firm. Additionally, I served three years as a member of the NASD District Eight Business Conduct Committee, and five years as a member and chairman of the South Dakota Investment Council, the body responsible for the state investment office which manages six billion dollars in state retirement funds. My experience is not insignificant.
In the current broker-dealer market virtually every sales person is presented to the investing public as a "Financial Adviser", "Investment Consultant", or "Financial Consultant". If an individual is not employed by a broker-dealer, the only way they can hold themselves out before the public under any of those titles is to register with either their state securities department or the SEC.
The proposed rule is a step in the wrong direction. Setting aside the issue as to whether stock brokers are qualified to act as advisers, the public is entitled to expect from the SEC actions that will help them understand the resources available to them in the investment marketplace. Using the old adage "If it walks like a duck and sounds like a duck, it must be a duck", if stock brokers/salespeople want to "act like investment advisers and sound like investment advisers, and therefore be perceived as investment advisers", then they should be regulated as investment advisers.
My experience tells me that most of the problems that arise between the investing public and members of the broker-dealer community are the result of less than full disclosure regarding the products being sold, poor communication between the parties, and a chronic lack of accountability for the actions of salespeople in dealing with their customers. The proposed rule does nothing to correct these problems, rather it will work to institutionalize them.
Richard D. Lauer
Sioux Falls, SD