Your Tax Dollars at Work ~ Feel Safer Yet?"

 
“Your Tax Dollars At Work -- Feel Safer Yet?” 

    A few months ago I was at a men’s group meeting where I knew no one.  After finding out I am a Certified Financial Planner practitioner, several asked what I thought about the Bernie Madoff ponzi scheme that is all over the news. 

    I was more interested in what they thought should be done about it—since I already knew what I thought-- and to a person their solution was more laws and more governmental supervision.  As recently as today, the investigation of the regulators charged with examining Madoff’s registered businesses indicates “unbelievable incompetence” in failing to enforce existing laws. Well folks, our companies are regulated by the same Departments charged with supervising Bernie Madoff – The Securities Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) specifically -- you know, the ones with egg all over their faces.

    We do believe there will be more rules and regulations, more regulators and more frequent examinations in the coming months. Many of you may have already been given additional documentation and been asked for your driver’s license to prove you are who you say you are. (Makes me feel safer in the same way as the time my shampoo was confiscated at the airport.)

Now, while we are regulated by the same people Madoff was, there are BIG differences in how we work:

1. Everyone gets third-party confirmation that their money is really there.
2. We do not take custody of client funds – meaning your investment checks are made out to the actual investment, NOT Access Financial Resources, Inc.
3. We do not advertise rates of return, and complex strategies to attract clients.

Here are a few experiences/incidents leading us to believe additional regulation is coming:

• 2005: While on the Financial Planning Association Board, I voted to sue the SEC to stop allowing Brokerage firms to have lower client accountability standards – David slayed Goliath – we won.
• 2007: National Association of Securities Dealers changes its name to Financial Industry Regulatory Authority.
• 2009: A small division of our company, $68,000/year gross revenue in 2008, was reviewed by FINRA.  They spent an entire week going through a computer questionnaire that indicated no real attempt to understand the reality of the situation, but instead to check all of the boxes. (form over substance) It would be virtually impossible to comply with every detail, and in our case would not benefit the client in any meaningful way.
• August 2009 – Oklahoma Department of Securities meeting with Irving Faught, Administrator (www.securities.ok.gov).  They are convinced that FINRA will end up supervising Registered Investment Advisors (that’s us). (FINRA is the one who missed Madoff, changed their name to sound more consumer oriented, and keeps the rules so complicated that big firms (the ones in all the trouble) love it and small firms struggle to comply).

 

Our response to expected increased regulation:

• March 2009 – We hired a compliance consultant and subscribed to a service for tracking all electronic communications. (Total cost per year, approximately $20,000).
• April 2009 – We started an internal compliance review, which will continue indefinitely.

 

Whew!!  That’s a lot to wade through and if you’re still awake, there is something we can all do.  Demand meaningful, effective regulation, NOT more of the same. Arm yourself and friends with prudent procedures, like tools available from the Oklahoma Dept. of Securities, to protect yourselves from being scammed.  Know that we are going over-the-top to protect client information and assets with healthy processes, procedures, technology, and Big Hearts.  No external rules or regulations can get us to WANT to take good care of people more than we already do.

 Feel safer yet?.......

Feel free to contact us with any questions about regulatory bodies or compliance documentation.