Hey Dom,
The government has no jurisdiction or right to know if a person saved some crazy money to decide to blow at a casino or day trade.
A casino gambler who brings in money - which they are expressly aware that they could lose - doesn't pose a risk to the gamblers around him, the table/game he becomes luck's whipping boy/girl at, or the house.
A daytrader who brings in money to daytrade with can - depending upon the amount of money he/she has, the size of the firm, and their attention to compliance, risk management, and suitability assessments - pose a risk to the traders around them, and the firm they trade at. In addition, large numbers of these - whether at one firm or numbering tens of thousands across the country - potentially, while admittedly unlikely, pose risk at the systemic level.
The NASD and SEC regulations are written to protect the customer from the firm and to insure the customer has all the information to make an informed decision.
This is true, while not the whole picture. The regulatory measures, whether at the governmental or SRO level, are also in place to protect customers from other customers, to protect firms from customers, to protect firms from other firms, and to try and maintain some degree of stability in the markets versus groups of customers or firms acting within certain activity profiles that could be deemed risky.
I question the legality of the "know your customer rule" that is mandated for the firm and not the casino.
Me too. Blows my mind to hear about folks losing junior's college money and hocking grandpa's teeth while he sleeps to put a few chips on black at the roulette table.
But seriously, I can think of a few reasons why suitability requirements exist (on top of the systemic risk posed by brokerage industry undertakings - which casinos don't have). Among those reasons are the sophistication of the undertakings (trading in stocks as compared to playing blackjack) and the social institution of gambling versus a broad swath of activities defined as "investing."
Gambling is recognized as a game, and legions of angry customers, class action suits, and altercations in casinos over the year have borne that out: you gamble, as you play basketball, drive your car, and other activities, at your own risk.
It's so widely known - again, the term "social institution" comes to my mind - that governmental administrations from left to right and all manners of special sessions, investigations, and commissions have never seen the need to remind people with a sign outside the casino or a sheaf of documents before you can hit the felt.
I don't think anyone walks into a casino saying, "I'm going to get rich today." If they do, they are almost certainly appraised of the likelihood of such shortly thereafter. At best, the overwhemling majority of casino visitors say, "I'm here for a comp," "I'm hoping to make enough to pay for a nice dinner at the Bellagio tonight," or "I'm here to have fun."
On the other hand, for many decades (and in particular, starting earnestly in the eighties), people have been told that investing is a necessity, in whatever shape or form such manifests itself. Told that the governmental safety net probably won't be there when they are ready to retire, that corporate pension funds maintain a risk profile that's too low to match the growth of inflation, and that besides your retirement, kid's college bills - that second home, a midlife crisis hotrod, and other big ticket items are well within the reach of the investor.
And, like other advice the American public gets about being healthy, raising their kids properly, etc., the message is remembered for its' topline content. And, in the land of coke and honey, we seek not only to invest, but to divest - invest in securities to divest ourselves of our lives.
And, of course, there's a lot of money to be made on the brokerage side, whether from legitimate brokerage products and services (stocks, bonds, mutual funds, advisory services etc.) or from strategies and products (some of which are complex, and all of which are more complex than blackjack or craps) which, without mandated disclosures and suitability assessments, hold the risk of total ruin within the perceived "necessity" of putting ones funds to work. Daytrading is not alone in this respect; other products and services regulated along the proposed DT requirements include penny stocks, DPPs, options and futures trading, and full discretion stockbroker relationships.
One final thought: of the big ones, there are many 30, 40 large American casinos (if that) - each with a huge amount of staff, millions of visitors per year, and an immediate regulatory body in the form of the state gaming commissions. And, most are concentrated in a handful of geographic locations: Las Vegas, Atlantic City, a few in Mississippi, Louisiana, Connecticut, and I believe soon in Minnesota.
The brokerage industry takes the form of thousands of firms ranging from proprietorships to global conglomerates across all 50 states, with tens of thousands of employees representing hundreds of millions of "customers" of varying involvement, from the Smalltown, USA one mutual fund-owning person to the trust/estate management service-utilizing internet billionaire (er, if there are any left).
For this (and the previously mentioned) reason(s), both the focus and style of regulation is completely different.
Jeez. I need a glass of water ;-)
LPS5 |
