Inspector Javert  is the alias --- or nom de guerre, as he prefers --- for  a former state examiner/commissioner, who spent many years in securities regulation and conducted untold numbers of field examinations of broker-dealers and their salespersons. He's been on the frontlines and in the trenches.  Although now retired, he remains an ardent (and unapologetic) advocate for public investors.  I hope you will enjoy his unique perspective on Wall Street.  If you'd like to pose any questions to him, please send your queries to bsinger@rrbdlaw.com

Bill Singer, Publisher of RRBDLAW.com

Running Without Blinders

My twenty-plus years of dedicated service to my state's security division wasn't what I'd call a career --- no,  the work environment was  so hostile, impersonal and stubborn,  that I could hardly call it anything else but a sentence. Still, I tried my best not to let the day-to-day cloud my vision.  I tried not to let anyone put blinders on me.  I often got to go out to firms and conduct exams, where I encountered stockbrokers helping people with real problems. Just because I was looking for screw-ups didn't mean that the mission to find things wrong at a firm kept me from seeing much that is right at most firms.  

Sadly, I'll admit, a lot of state staffers are not so benevolent. Truthfully, it is difficult to hear the complaints of investors week after week (some of which are both serious and heart-wrenching) and to remember that these stories are the exception, not the rule. Some examiners  start their careers with cynicism and end it in deep depression; but others come to state regulation from industry or from real-world jobs and understand that selling something today and having the market price in the paper the next day, the next week and the next year is not an easy career for the faint of heart. Most examiners, in my experience, do their jobs with the cool detachment of an emergency room doctor and process all the forms and filings with icy indifference. They don't make enough money for the markets to have much meaning in their lives.  Notwithstanding, it's my conclusion that most brokers do their work with honesty and integrity; standing between the firms that have securities to sell and clients who need an investment portfolio consistent with their resources, goals and tolerance for risk.  

Frankly, I took my job seriously . . . very seriously.  Why?  Well, to my mind, accumulating wealth to fund your early retirement or to pay the college tuition for your children are among the most worthy things we do. To that extent, stockbrokers aren't just tradespeople selling us appliances.  No, as I see it, your broker's role is frequently only second to your family's doctor in importance to the long-term well-being of you and those who mean the most to you.  Consequently, I was diligent in protecting your family's financial health from those who were rip-off artists --- but I also tried to encourage and nurture those financial professionals who had their hearts in the right place.  

Brokers and their broker dealers give investing families access to Wall Street --- be it through a seat on an exchange or a market-making desk in the over-the-counter markets.   As things stand, you can't really deal directly with the counter-party to your trades.  All those transactions ultimately go through members of an exchange or securities association.  Yeah, to some extent it's a monopoly; which is why I hold those who guard the door to a very high standard.  Those financial pros who stand between you and the Floor or you and the OTC markets have an obligation to tell you the hard truth about saving, investing, and the risks involved.  It also means that they should take the time --- painstaking if necessary --- to explain to you all the intricacies and eccentricities of Lions, and Tigers, and Spiders and Bears.  

In recent years, the cynics have carried the day with an "I told you so" smirk on their self-satisfied faces. They "knew all along" that the markets were unfair and now there are settlements upon settlements giving credence to that cynicism. And you are victims of the firms which could resist anything but temptation; and some of those malefactors were established companies with revered histories and esteemed names. But this, too, shall pass. And the examiners who tried to see the doughnut instead of the hole have hunkered down a bit while the e-mail transcripts are released to the chagrin of brokers and regulators alike.  

Recent years have embarrassed the SEC, the NASD, the NYSE, the broker dealers, the representative community, and the states. Perhaps now we can go forward each doing their job with a more profound respect for the other and a more sincere understanding of the contribution each make toward making American markets the best in the world.

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