looking for feed back for the letter below to congress I am thinking of placing it on various bulletin boards. A link will be given to a site, which lets you put in your zip code and in turn email your local congressperson. I am asking people to copy the letter, make any changes they wish and forward. Please let me know if I should change, add or subtract anything. I am going to also post this again on Monday when more of the good people here are present. Just think this may help me to stop ranting. Thanks for any help.
Dear Sir or Madam:
I am writing to inform you of my concern for information disseminated to the small investor by Wall Street brokerage firms. During the recent Congressional hearings Wall Street firms proposed eliminating conflicts of interest, such as maintaining the Chinese wall between investment banking departments and analysts. In regard to this proposal, there are already existing securities laws prohibiting this practice. It was also proposed there be greater self and market monitoring, but again there are already existing laws and regulations covering such practices and procedures. It appears the proposed changes have little substance. At this time the NASD is down 70% from it’s high and during this decline major firms on Wall Street issued 1-2% sell recommendations. This is an alarming static, indicating serious conflicts of interest and ethical business practices.
After the World trade Center disaster it was widely reported in the media individuals should not sell or short stocks and mutual funds for the good of America. After the markets open on September 17. 2001, most major indexes fell an additional 10% for the week. Wall Street players were aware of huge institutional sell imbalances in the days before the markets reopened and undoubtedly used their media influence to manipulate the small investor and ultimately support the sales of large clients. Even after the Congressional hearings it appears Wall Street’s use of patriotism to manipulate the small investor suggests ethics, moral and business practices are at an all time low, and it is still business as usual.
These recent and past events again highlight the need for significant changes in the objectivity of information provided to the media by Wall Street. Here are a few simple recommendations.
1. Analyst bonuses based on returns associated with recommendations, not investment banking fees, commissions, or any basis presenting a conflict of interest.
2. The industry should develop clear, concise and standard language for buy and sell recommendations.
3. Once a month brokerage firms will submit to an independent government agency a report detailing changes in stock recommendations and the trading of that stock for the firms own account, large clients, and the analyst. The reports should detail trading one month before changes in recommendations and two months after it’s issued. Top firms should issue an aggregate report semi annually with changes in recommendations of widely held issues during that period and the changes in the stock price. The report should also detail the firm’s market strategists recommended allocations and returns. The firm’s customers will be informed of the report publication and upon request distributed with out charge. Reports will also be distributed to appropriate media outlets.
4. Communication with the media must contain full disclosure of possible conflicts in interest associated with recommendations.
The American securities industry is the most heavily regulated industry in the world. The actions by many Wall Street firms indicate the regulations are not working or being properly enforced. Steps need to be taken to better monitoring and enforcement. Self-regulation by firms and markets appear to be ineffective. The SEC or a new government agency should have a greater role in monitoring and enforcing regulations. Current penalties do not appear to be effective in discouraging illegal and unethical business practices. The scope of the current laws and regulations should be broadened with significant finical penalties (triple damages) if found guilty. Mandatory prison sentences should be applicable to a broad range of existing and new laws as well as well as broadening the application of the current regulations baring guilty individuals and firms from further participation in the securities industry.
Thank you for you consideration and it is my hope Congress will take steps to protect the individual investor from the unethical and illegal practices, which appear to be common on Wall Street.
Sincerely yours, |
