A few stories picked up at random on the net, the common thread of which is that it’s good to be a banker or the functional equivalent. Among other things, you get to make your own laws.
Consider first, this article from this morning’s Times. When a broker defrauds you, you can’t sue them. Every brokerage contract in the country requires a victim of broker fraud to seek relief through arbitration. It’s a system already set up to favor the brokers, but even that’s not good enough for them. When they are found to be in the wrong they can seek absolution, so that if you, as a consumer, try to do your due diligence, you won’t be able to find out that that friendly broker has been found guilty of some nefarious deed or other.
An industry group called the Financial Industry Regulatory Authority maintains a database of sanctioned brokers, but if you say pretty please, they’ll scrub your misdeeds:
As Main Street investors rely increasingly on Finra’s online database, BrokerCheck, to vet professionals on Wall Street, brokers and executives like Ms. Kief and Mr. Daifotis are pursuing every means possible to remove negative information from their records. Ms. Kief, in fact, even went so far as to ask her arbitrators to expunge two unrelated arbitrations, which the panel declined to do.
“People are starting to use BrokerCheck the way they use TripAdvisor,” said Seth E. Lipner, a professor of law at the Zicklin School of Business at Baruch College who represents investors in cases against brokers. “No broker wants these red flags on their record.”
The effort to expunge records would be less critical if brokers were subject to the same legal exposure as other professionals who are defendants in lawsuits brought by customers, like doctors or lawyers, investor advocates say.
But as a result of a 1987 Supreme Court decision, brokerage firms have been able to insist that customers give up their right to sue in court before they can even open an account. The resulting transfer of investor lawsuits to private arbitration has meant that Wall Street firms and their employees have avoided the burden of a court record of claims against them for a quarter-century. Arbitration hearings are closed and documents are not available to the public. The information on BrokerCheck is thus the only repository of allegations an investor can mine.
Why, you might ask, don’t the victims object to the scrubbing. Because the Masters of the Universe bribe them not to do so. How silly of you to ask.
Meanwhile, over at the SEC, Obama’s latest industry friendly appointment (you can always tell the really bad ones. They’re the ones that breeze through their Senate confirmations) has installed yet another fox in the henhouse:
The Financial Times has caught a significant revolving door that its business press peers have largely overlooked.
In a front page story, the pink paper points out that the incoming chief counsel for the SEC has an outstanding suit against him from his last incarnation, as head of compliance for the Americas for Deutsche Bank.
Read the whole story for all the details. Suffice it to say that it’s a wonderful thing if the prosecutor is a former employee, and is possibly looking ahead to another, more lucrative position, down the road.
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