Securities Industry

As the U.S. Supreme Court sees it, a worker who faces comments, gestures, actions or attitudes lewd enough to prompt a "reasonable person" to find the atmosphere "hostile or abusive" can justifiably charge the offending party with harassment. As stock brokers and other members of the securities industry see it, that standard of conduct doesn't apply to them.That's largely the Supreme Court's fault; in 1991, it upheld the industry's right to enforce mandatory arbitration in cases of alleged bias.

Wall Street might have turned its back on Democrats this election, but that's not the case among Maryland investment firms. The vast majority of contributions to candidates by T. Rowe Price employees went to Democrats. And Democrats were the beneficiaries of all candidate donations by Brown Capital Management workers - with President Barack Obama receiving the bulk. But even in this deep-blue state, Democrats don't have a lock on political contributions. The top recipient of donations by Legg Mason employees: Republican presidential challenger Mitt Romney.

WASHINGTON -- The Securities and Exchange Commission approved a rule yesterday requiring brokerages to cease business and transfer customer accounts to other securities firms if they haven't adequately addressed Year 2000 computer problems by Nov. 15.The rule isn't expected to put many firms at risk of being closed, since most passed readiness tests conducted by the Securities Industry Association in March and April."

Maryland's attorney general alleged Wednesday that a Baltimore man had defrauded investors of nearly $500,000 and ordered him to stop selling securities and acting as an investment advisor, activities for which he was not registered. Attorney General Douglas F. Gansler is seeking fines and a permanent ban from the securities industry for Casey Charles and his company, Infinite Equity Strategies LLC. In a cease-and-desist order, the state accused Charles of transferring retirement funds of investors to an out-of-state company, which later transferred the money to his own bank accounts.

NEW YORK -- Travelers Group Inc. said yesterday that it completed its $9.3 billion acquisition of Salomon Inc., the largest purchase of a securities firm in the United States.Travelers, an insurer and consumer finance company, is joining its Smith Barney Inc. brokerage with Salomon Brothers Inc., the world's biggest bond trader, to create the second largest U.S. securities firm and a financial services powerhouse. The new firm is called Salomon Smith Barney Inc.The merger combines "a large domestic retail distributor with a very good fixed-income, 'OK' global investment bank," said Schroder & Co. analyst James Hanbury, who advises investors to buy Travelers stock.

NEW YORK -- Smith Barney Inc. is expected to announce today a settlement of a class-action lawsuit that accused the firm of denying women promotions and doing nothing while brokers harassed women employees.Under the settlement, women employees would take their claims to an independent arbitrator outside the securities industry, people involved with the negotiations said.Such a move is a radical departure for a Wall Street firm. Wall Street firms have typically fought long and hard to have all disputes -- whether with clients or employees -- settled by industry arbitrators.

Maryland's attorney general alleged Wednesday that a Baltimore man had defrauded investors of nearly $500,000 and ordered him to stop selling securities and acting as an investment advisor, activities for which he was not registered. Attorney General Douglas F. Gansler is seeking fines and a permanent ban from the securities industry for Casey Charles and his company, Infinite Equity Strategies LLC. In a cease-and-desist order, the state accused Charles of transferring retirement funds of investors to an out-of-state company, which later transferred the money to his own bank accounts.

LONDON -- Peter Norris, who ran investment banking at Barings PLC when it collapsed last year after $1.3 billion in trading losses, was banned yesterday by British authorities from working in a senior executive position in the securities industry for three years.As chief executive of the investment arm, Norris was the executive ultimately responsible for overseeing Nicholas Leeson, the trader who ran up the huge losses in unauthorized dealings from Singapore.Leeson is serving a 6 1/2 -year prison term there.

Those divining the fortunes of the securities industry in 1995 are honing in on a set of key factors. The top three, in order of importance, are: interest rates, interest rates, and interest rates.It was interest rates, or their sharp turnaround last year, that cut the legs from under a three-year record run of earnings for securities firms. Pretax profits for New York Stock Exchange member firms that do business with the public dropped from $6.6 billion in the first nine months of 1993, to $1.4 billion in the same period last year.

A. B. Krongard, chairman and chief executive of Alex. Brown Inc., will be named chairman of the Securities Industry Association tomorrow at the trade group's annual meeting in Boca Raton, Fla.The association represents more than 760 brokerage firms, mutual funds and investment bankers.Mr. Krongard said his agenda as chairman of the organization will include working to educate consumers about the importance of savings and investing; lobbying for legislation that gives investors incentives, such as tax breaks, to save money; and working to retain and build public trust in the securities industry.

Last year, I stood next to President Barack Obama at the White House, when he pledged to make securing the country's most vital computer networks a top economic and national security priority. It's a task that President Obama has described as the "most serious economic and national security challenge we face as a nation." Recent news that Google was victim to a "highly sophisticated and targeted attack" is a stark reminder that, as individuals and as a nation, we must be more vigilant and more determined in our efforts to secure our cyber infrastructure.

Allegations that American Funds arranged improper sales deals with brokers are posing a quandary for financial advisers, who have helped make the Los Angeles firm the nation's most popular mutual fund company in recent years. After 17 months of revelations that have rocked the fund industry, some advisers say it's difficult to find high-quality companies that haven't had their reputations sullied. "Quite honestly, where else do you go?" asked Emerson Fersch, a principal at Capital Investment Advisers in Long Beach, Calif.

NEW YORK - At the Sherry-Lehmann wine shop on Madison Avenue, $500 bottles of Bordeaux are selling at a clip that owner Michael Aaron figures is 7 percent ahead of 2003's pace. "It's instant gratification," Aaron said last week, "and why not get it?" The reason for the increase: Wall Street securities firms have been shelling out their annual bonuses, the discretionary six- and seven-figure payouts that can account for up to 90 percent of an investment banker's or bond trader's income.

NEW YORK - Fidelity Investments and other fund management companies may not reap much of a windfall from President Bush's plan to establish private Social Security accounts, according to a Securities Industry Association report yesterday. Restrictions on investment options and administrative costs may limit revenue for the firms to $39 billion over 75 years - about 1 percent of the $3.3 trillion total revenue forecast for the financial sector in that period, according to the report by the Washington-based lobbyist for the securities industry.

How do you pick a financial adviser? By carefully working your way through the adviser's credentials, the price you'll pay and the services you'll receive. When the sales pitch comes your way, examine it closely, item by item. How will the adviser be paid? There are fewer and fewer commissioned sales people in the securities industry. Many brokers have switched to a percentage fee structure that's based on the dollar amount of assets under management that can range from 1 percent to 3 percent.

When people think about where it is smart to put their money these days, the stock market frequently doesn't make the short list, and that's a serious challenge for the nation's securities industry. "People say, `Where do I put my money? Whom do I trust?'" said Thomas Grzymala, a financial planner in Alexandria, Va. "All the people losing their retirement plan money is the straw that broke the camel's back. And the straw is still being piled high. "Right now, there is a big gaping hole of trust and confidence between individual investors and the major wire houses in America.

Denver -- The securities industry is constantly adapting to changing market conditions. From the arbitragers who hedge on stock, bond and commodity ''spreads'' to the creators of ''equity derivatives'' such as foreign stock-exchange index options, the securities exchanges are often at the forefront in the invention of new ways to invest in advantageous market situations.As I see it, the marketing of small minority-owned businesses to the securities industry could create the next generation of fortunes on Wall Street.

The era of T+3 has come to Wall Street and to Main Street.T+3 is industry shorthand for "trade plus three days," the new Securities and Exchange Commission regulation that requires investors to settle stock trades within three days of execution. Under the old rules, investors had five days to settle trades.Although seemingly arcane, T+3 has raised the ire of investors across the country, who complain the rules will benefit brokerage firms at the expense of their customers. At a recent series of town meetings held by SEC officials in various U.S. cities complaints about T+3 dominated the question-and-answer sessions.