There are two different articles in the Wall Street Journal yesterday that deal with unethical / illegal behaviour on the part of individual traders1 and improper business arangements between search firms and transfer agents2. In general, news about improper business dealings on Wall Street isn't really but these two were of interest to me.
In general, these articles highlight the reality of the markets for an individual investor. As a general rule most agencies are supposed to look out for ALL investors interests but fail to do so; Each investor must be on his or her toes to determine if their agents are actually acting in their best interest. It is as if the capital markets are one big confidence game sometimes; as if they're designed to take advantage of the novice, the inexpericed, and the uninformed.
The first article (superscript 1) was titled Trader's expenses prompt closer look at propriety of gifts. I've never worked on wall street, but many of the businesses where I've worked have had policies about accepting gifts from vendors (the usual policy was don't). It is true, though, that the NASD has a policy limiting gifts to $100. The article notes that it's a very fuzzy area wether trips and entertainment are considered gifts or normal business expenses. In this case the trader was supposed to have taken some members of Fidelity on lavish trips- in reality he was taking his family. What I'm interested in knowing is how, exactly, should companies look for expense account fraud? Do they just accept that there will be a small level of account 'cheating' and let it go at that or do they track how the money is spent and require an amount of justification for everything?
I'm also curious because these trips come from my investments in the form of expenses. Can investment companies be trusted to act in the shareholder's interest when they are offered expensive, elegant trips from the brokers where they trade? I'm not sure that they are willing to look for the lowest comission as much as they are willing to use a broker who is freer with the gifts and food.
The second article, titled SEC Investigates Transfer Agents For Kickbacks, discusses the current investigation into transfer agents (companies hired by other companies to locate shareholders with unclaimed assets) and wether or not they are funneling shareholders to their preffered search firms. Additionally, the firms are being investigated to determine if they're running the required two free searches first before they run the more expensive 'Deep Search' and then charging an excess fee to those shareholders that they do find (often 30% or more of the asset's value).
