About a year ago the NASD and NYSE changed their modus operandi and announced to their arbitrator ranks some sweeping new rules that rankled many long time arbitrators, myself included. Remember who the NASD is. It is the brokerage houses themselves who are trying to police their ranks. In legalese it is called an SRO- a self-regualtory organization. I call it the fox still guarding the hen-house. As an arbitrator for over a decade the NASD decided that guys like me who are Registered Investment Advisors, (in my case, I am the Chairman of an RIA firm) who are fiduciaries, who have no axe to grind with commissions, in many cases are owned by brokerage-firms and have conflicts-of-interest. I have no conflicts. We are not paid to generate commissions and trading fees in any way, shape or form. In fact, at my firm we won't even allow soft-dollars to be used for research expenses.
NASD member firms are paying much more in fines than ever before. Arbitrators make the awards. Brokers were to cough up over $125 million in fines which was a 21% increase over the amount in 2004. Total fines collected over the past four years increased 84%. Six big firms were fined more than $40 million for unsuitable Class B and Class C shares in mutual funds. (The brokerage ranks feed off of switching mutual funds and hiding the sales charges in Class B and Class C shares, ask any mutual fund wholesaler honest enough to admit it) Those firms being fined were Citigroup (Smith Barney perhaps?), Chase, Merrill Lynch, American Express (now Ameriprise of all names), Wells Fargo and Linsco-Private Ledger of Boston and San Diego.
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