Archive for March, 2016

‘FINRA’s treating Reg S-P as a traffic incident as opposed to something that they’re really genuinely concerned about’ @HDelux to @onwallstreet

Thursday, March 31st, 2016

“The practice is quite prevalent. The action by FINRA is not all that prevalent. In fact, FINRA has not really taken much action with Reg S-P,” says Brian Hamburger, an attorney and CEO of MarketCounsel, a business and compliance consulting firm. “They seem to be treating Reg S-P as a traffic incident as opposed to something that they’re really genuinely concerned about.”

As a result, many firms have come to see Reg S-P as a competitive weapon, according to Hamburger. He says it’s not uncommon for a brokerage that is losing advisors to a rival firm “to have tipped their hand” to FINRA in an effort to raise suspicions about how client information was handled.  “Effectively, these firms have been using Reg S-P as the new restrictive covenant,” he says. That rule is viewed as “one of the few remaining tools to retain customer information,” he adds.

Hamburger faults regulators for failing to flesh out the details of the privacy regulation to stipulate what information breakaway brokers are permitted to take with them when they change firms. The SEC, the original author of Reg S-P, proposed amendments to that rule in 2008, but it has not enacted them. Included in that proposal was a provision that that would permit the transfer of some third party information – i.e., client data – from one firm to another.

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‘@CFPBoard makes bold play to inoculate itself’ @MarketCounsel’s Sharron Ash to @RIABiz

Monday, March 28th, 2016

Sharron E. Ash, chief litigator for MarketCounsel says that people give up far more than meets the eye by agreeing to arbitrate. “Courts offer what arbitration does not – transparency, precedential value and appellate review. Arbitration records are confidential.”

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Listen to Brian Hamburger @HDelux explain to the @WSJ and @VeronicaDagher: “How to Pick the Perfect Financial Adviser”

Friday, March 25th, 2016

MarketCounsel’s Brian Hamburger breaks down the questions you need to be asking before hiring a financial adviser.

Listen here.

SEC (once again) talks third-party examiners but @danbernstein is skeptical @iimag

Wednesday, March 23rd, 2016

Daniel Bernstein, chief compliance attorney at MarketCounsel, an Englewood, New Jersey-based adviser to RIAs, isn’t so sure.  The timeline before the industry sees a proposal is likely to be extended beyond the end of this year, and the comment period will be rife with tension, Bernstein predicts.  “I think there are a lot of questions to be answered here,” he says.  How do you vet examiner and ensure quality?  What will the questions be? This is going to be a long process.”

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“@Weissbluth is downright exuberant about this latest iteration. It expands his reach by using existing infrastructure,” HDelux to @RIABiz

Friday, March 18th, 2016

“Getting Nezvold’s help makes sense, according to Hamburger, because HighTower has gone from being a recruiter of talent to a buyer of businesses. Nesvold helps in that shift to a more M&A orientation. “They’ve gone from acquiring talent to acquiring businesses,” Hamburger says.

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‘Succession plans may not be required for IAs, although it could be considered part of their fiduciary duty’ @HDelux to @VeronicaDagher @WSJ

Friday, March 11th, 2016

Privately held financial-advisory firms generally don’t have a specific legal requirement to do succession planning, although for many that could be considered part of their duty to act in clients’ best interests, says Brian Hamburger, an Englewood, N.J., lawyer and consultant to advisers. Last year, an association of state securities regulators adopted a model state law that would require many advisers to have a written plan that includes the assignment of duties “in the event of the death or unavailability of key personnel.”

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Hey, @UChicago: The distinctions between a broker and an RIA is not something to be tucked away in fine print disclosures,’ @HDelux to @RIABiz

Wednesday, March 9th, 2016

Brian Hamburger of MarketCounsel Inc. says the authors of the study were either lax in their reporting or uneducated in the nuances of the industry.  “Among the most significant issues that plague investors is that of investor confusion. They simply don’t know whether they are working with fiduciary investment advisers or brokers. Unfortunately, the impact of this confusion is incalculable. And while one can understand brokers’ use of the term (akin to the motivations of the wolf in sheep’s clothing), its use by the media and, in this instance, academics, is either misinformed or lazy.

… Hamburger doesn’t find Egan’s explanation satisfying.  “It’s a shame that the authors chose such a vague term when attempting to make a persuasive data-backed presentation designed to help the public. The study exclusively evaluates registered representatives of broker-dealers, commonly referred to as brokers. That is, unless they are trying to confuse investors.”

Egan takes issue with Hamburger’s assessment that his team was either lax or confused in reporting its findings.  “We do not see how the research could be either lazy or misinformed. We clearly define who we research, providing an explicit definition of what we mean by financial adviser, which is the object of our study.”  He adds: “Our data set includes registered representatives as well as 250,000 investment advisors. As discussed in detail in our paper our data comes directly from FINRA’s BrokerCheck database where they accordingly label some of the registered representatives we study as “Investment Advisers” and define the term “Investment Adviser” on each investment adviser’s BrokerCheck webpage. This number does include Investment Adviser Representatives. We are being consistent with the labeling in our data source.”

But Hamburger points out that even the authors’ small print definition of “advisers” is flawed.  “The author told you that their review ‘includes registered representatives as well as 250,000 investment advisors.’ Yet, that is flat-out incorrect. First, the author does not define ‘investment advisors.’ Keep in mind, there are not 250,000 registered investment advisers in the United States, so I can only speculate that the author’s claim is that, of 640,000 FINRA representatives, 250,000 of them are separately registered as investment adviser representatives. But again, this unclear use of titles is significant and cannot be overlooked.”

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‘Instead of worrying about collecting, firms should focus on preventing #fraud in the first place,’ says @HDelux to @aoreport @CNBC

Wednesday, March 9th, 2016

“You can go to court and use other resources to try to get paid, but it doesn’t substantially increase the likelihood that you will get paid,” said lawyer Brian Hamburger, founder, president and CEO of consulting firm MarketCounsel.  Hamburger thinks a national recovery pool would create perverse incentives in the industry, encouraging brokers with arbitration awards against them to leave the business because they know their clients will be made whole.  “The focus should be on preventing fraud and wrongdoing in the first place,” said Hamburger, who suggested investors be more diligent in picking their financial advisors and understanding their investment advice. “Look for advisors you know with deep roots in the community,” he added. “It’s up to individuals to get engaged and to develop financial wherewithal.”

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Innocuous or Unforeseen Trouble? @HDelux distinguishes for @FinAd_IQ

Wednesday, March 9th, 2016

Brian Hamburger, an attorney and founder of MarketCounsel, a compliance consulting firm for advisors, tells U.S. News that there are some important similarities between the iPhone case and the data requests sometimes made of advisors occasionally asked by third parties to provide information on their clients.

He argues that by asking Apple to open someone’s phone, the FBI is effectively asking the technology giant to decide “who is worthy of being protected” and who is not.

Hamburger notes that wealth advisors can sometimes be asked to furnish client information to third parties – whether it be family members, the client’s accountants, or others.

While some requests might seem innocent they can result in unforeseen trouble for the advisor, he tells U.S. News.

Read more.

Financial Advisors Watch Apple-FBI Dispute with Familiarity, says @HDelux to @katestalter @USNews

Wednesday, March 9th, 2016

Brian Hamburger, an attorney and founder of MarketCounsel, an firm in Englewood, New Jersey, that offers business and compliance consulting to advisors, says the financial services industry has specific concerns about protecting client data.

“The FBI has asked Apple to be the arbiter as to who is good and who is evil, who is worthy of being protected by the technology they are using. Similarly, investment advisers find themselves asked to furnish information to people other than their clients. And while sometimes these requests can seem innocuous, such as a family member trying to help out, it can result in unforeseen problems for the adviser,” he says.

Hamburger cites an example of a request for information that was not what it seemed. “Recently, one of our advisor clients helped facilitate a transfer on behalf of a client that was away on safari, only to come to find out that the request did not emanate from the client, but rather, it was effectuated by a fraudster’s breach of the client’s personal email,” he says.

He says unintended consequences of privacy rules may even prevent advisors from helping clients in certain situations.

“Advisors don’t always have the leeway they need to really help their clients showing signs of diminished capacity. That’s due to stringent privacy rules that render them unable to assist in the manner they’d like by, for example, enlisting the support of third parties. But the privacy rules can’t be written with so many shades of gray. So it leaves investment advisers with bright lines that are not always sympathetic to the human condition,” Hamburger says.

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