Treating Stockbrokers Fairly (TSF)

OPEN LETTER TO LONDON STOCK EXCHANGE/SECURITIES & INVESTMENT INSTITUTE/APCIMS/FSA/UK GOVERNMENT/MEMBERS OF PARLIAMENT/FLEET STREET/INVESTORS & OTHERS ON THE ELECTORAL ROLE WHO BELIEVE IN DEMOCRACY, FAIR PLAY & THE RIGHT TO WORK

I suppose if you're a builder and have been putting up skyscrapers for a living for 30 years plus you would be pretty miffed if someone told you that in order to continue what you've been doing for most of your adult life you would have to take a degree course. Furthermore this examination would take around 3 months off your work schedule and might lose you some contracts in the process. Without this examination and the assumed certificate you would NOT be able to practice as a self-taught builder. As part of this examination process you might be told that the British way of building was no longer the norm (by someone who has never lifted a brick) and that you must adopt new methods that have only recently been proved to be disastrous for the industry. In addition the reappraisal of the Health and Safety issues surrounding your building activities would be reappraised and a lecturer would remind you of the need to wear a hard hat even whilst sitting inside your wooden shed eating sandwiches and drinking builders tea. READ ON....

My partner, a former Lieutenant in the Russian Army, a daughter of KGB parents (& a friendlier family you couldn't imagine to meet) has ordered me to respond in the appropriate manner. I was brought up in a typical English (actually the roots are Cornish but I wont dwell on that just now) family with strong protestant beliefs and a self-belief that fair play and hard work would pay off in the world of business, a business or profession as it happens that family members have been doing the same way for over 135 years. In the traditions of many apprentice trades the world of stockbroking and investment management has evolved through brokers passing on trading and investment techniques to younger brethren and investors in turn often writing and talking about their experiences sometimes to brokers but usually to all and sundry. I have a letter dated 1986 during 'Big Bang' suggesting that I was deemed back then (perhaps) as someone who they would grant a Registered Representative status to. The letter goes on to say that the LSE would respond in due course. That follow-up letter from London Stock Exchange ("LSE") never arrived and as my father, my younger brother, around 3500 Members of the Stock Exchange can testify the single ownership shares controlled by them were unceremoniously swapped for a pittance, £10,000 each. In order to appease this obvious anomaly in valuation their membership was transferred to a new FREE body (The Securities Institute) who promised to protect their interests and uphold the ethics that once proud Members maintained. In addition those younger brokers and practitioners, then described as the "marzipan layer", were unconditionally offered FREE membership alongside the former Members, some who had taken Stock Exchange Practice Examinations, others simply fathered in. It should be recalled that the "LSE" effectively suspended its examinations around 1986 and The Securities Institute (as it was known then) took on the old Members and a few "marzipan" brokers without any plans to introduce or replace the existing arrangements. My interview with the then CEO clearly stated to me personally at SII offices near the Monument that a waiver for further examination would be accepted at any time in the future. My father, my younger brother, myself and around 3500 stockbrokers and stockjobbers thus became MSI (Members of The Securities Institute). Many brokers back then were alarmed at the way that investment banks were behaving; the rest is history. The Securities Association was formed from the Financial Services Act 1986 and all 'registered representative' licences were administered to those of us deemed competent to give advice. Those that had been simple assistants were given 'registered trader' permits allowing them to take orders rather than actually give advice or transact. Now a peculiar thing happened I recollect prior to the new Act, FSMA 2000, replacing the FSA 1986. All compliance departments reassessed those in the front office and 'control functions' were introduced. I remember being seriously perturbed that my qualifications in banking, my experience as an inter-bank money broker and my experience as a bullion broker & clerk between 1975 (when I left school) and 1980 when I joined a stock exchange member firm would NOT be taken into account. In essence I believe that it was too complicated for my compliance department at that time to processs these functions but ultimately my control functions were (see FSA website register on the internet) CF21 Investment Adviser, CF26 Customer Trading and interestingly CF27 Investment Management dates 1st Dec 2001 to 31st October 2007. These dates are interesting because it would appear now that brokers and investment managers in my position have been suitably stitched up by FSA and all the bodies that have interests in maintaining CPD (Continued Professional Development) and generating vast revenues from providing courses and examinations for younger less experienced capital markets personnel. On 1st November 2007 prior to the June 2009 publication of the 168 page Retail Distribution Review my control function was downgraded like many others to merely CF30 Customer allegedly replacing the previous 3 functions but actually teeing us all up for a new Level 3/Level 4 process. Words like draconian and orwellian spring to mind but it's the sheer ageist attitude here together with the lack of honesty, integrity and ethics that I find extraordinary. No wonder then that many secretly are alarmed at the little white book that was sent to me recently by The Securities & Investment Institute (now with 40,000 members)entitled "Integrity At Work". In addition the FSA have introduced another interesting sideshow called "Treating Customers Fairly". It might be argued, and who could disagree, that the banks have NOT treated their customers fairly but without sounding arrogant or patronising I doubt the same could be said for the remaining UK stockbroking firms nor their personnel. Perhaps if the UK government had listened back in 1983-1985 to the experienced exchange personnel who objected to banks competing head to head with brokers in investment products and trading enterprises then this debate about professionalism and integrity would not have surfaced. It was evident, however, to many that once the Conservative Government had introduced the FSA 1986 and a new regime of regulation and compliance that a monster would be created. I suppose that the great irony is that it was the same Thatcher government who preached PRODUCTIVITY that created this institution, the super-regulator, that meanders from one crisis to the next, preventing established practitioners from driving the investment community. One former broker I know eloquently referred to the compliance industry as THE DEALING PREVENTION UNIT and he wasn't far from reality. Having looked at the RDR myself I find little to commend. It has little mention of what we do daily and seems to forgot the raison d'etre for having stockbrokers and investment managers in the first place. The sheer misundertanding of the word INVESTMENT is the basis of what is wrong with FSA (and New Labour). The likelihood of FSA addressing the need to attract suitable professional personnel is unlikely. In the past few years there has been a deliberate attempt by FSA to replace ex-practitioners with lawyers, accountants, professional bureaucrats and such like. I can't see any reasonable experienced and competent stockbrokers and investment managers moving across to a compliance role.

The Conservative Party should oppose the RDR and all its recommendations as it goes against the grain of what the british end of the market stands for. The sooner the FSA is disbanded the better along with the permanent dissolution of FSMA 2000 and the interference that goes with it. Over the last few years many onshore bucket shops have been granted licences by FSA; if they sat offshore they would be called boiler rooms. A new exchange that is self-regulated like the old exchange that my family were part for over 130 years is long overdue. The SII like many other groups with vested interests needs clearer direction and I think UK broking personnel need to stand up to these orwellian changes. The alternative is to move offshore BUT this would be a great disservice to the many '000s of clients that already have had to put up with monstrous legislation, the costs of which have been passed on to them and are likely to continue to do so. The current millions of complaints outstanding with the banking ombudsman will pale into significance if experienced personnel grandfathered into the process are treated this way.

YOUR EXCHANGE NEEDS YOU TO STAND UP TO THIS HYPOCRISY AND SAY NO TO 'FSA' AND NO TO 'RDR'. WE ALL RECOGNISE THE NEED TO IMPROVE STANDARDS BUT THIS IS ONE STEP TOO FAR LORD TURNER!

CAN I SUGGEST A NEW FSA DIRECTIVE "TREATING STOCKBROKERS FAIRLY" (TSF) FOR THE 5,000+ BROKERS EFFECTED BY THIS NONSENSE?