Stockbrokers have a fiduciary duty to their clients. "Know your client" is a requirement for brokers. I know with the recent popularity of internet trading, this is something that has been forgotten. People have different investment goals, depending on their financial status, needs, and appetite for risk. I remember when brokers were being sued for advising clients to make investments that were too risky, and for churning accounts - that was long before e-trading, of course.
Furthermore, as financial institutions, brokerages have to satisfy federal requirements that they, themselves, remain liquid.
Being *more* prudent than the law requires isn't illegal. Being *less* prudent thant the law requires is illegal.
Look, I am a lawyer, if I give people bad advice, they can sue me, and I can lose my license. I am held accountable. If a doctor gives you bad advice, you can sue him, he can lose his license. He is held accountable. If your stockbroker gives you bad advice, you can sue her, she can lose her license. She is held accountable. If your CPA gives you bad advice, you can sue him, he can lose his license. He is held accountable. Get the picture? The type of advice being dispensed here is the type of advice you expect from someone with professional training, who can be held accountable for breaches from the standard of care, but you can't sue them, and you can't hold them accountable. It's not just hot stock tips. It's not just opinions about what companies make good investments.
For a non-lawyer to give people legal advice is called practising law without a license. There's a reason it's illegal. The persons giving the advice have no training, and they can't be held accountable. The type of advice being dispensed here is the type of advice you'd expect from a trained professional, but it's not being dispensed by trained professionals. I think that's irresponsible.
You wouldn't go to a layman for advice on how to take out your own appendix, or how to treat cancer.
The securities laws were passed to protect people. You may think they are arbitrary, but they are the law. You shouldn't go to a layman for advice on these matters.
Giving hot stock tips is one thing. This is something else. If there were a plague going around, and a doctor said, "don't worry, it will be over soon," that would be the height of irresponsibility.
Bottom line - if you want stock tips from the Porch, God bless you. Otherwise, be careful. |
