American Securities Association proclaims a fresh 'voice' but for now seems to be a rebel with a cryptic cause

February 24, 2016 — 10:44 PM UTC by Lisa Shidler

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Brooke’s Note: As the Republican party seeks a new identity in technicolor every night on the cable news shows, it is popular to say it operates in “lanes.” The battle of ideas between those factions is as fierce as it is with the hated Democrats. Maybe the same thing is beginning to happen with the big pile of companies we call Wall Street. The regional firms have about as much use for the national firms and the target those wirehouses put on their collective back as RIAs do. We saw a little of this internecine jockeying a while back when LPL’s Mark Casady broke with FSI on the DOL’s fiduciary stance. See: LPL reconsiders FSI as it drops out of its board, offers own DOL stand and hires own lobbyist. The formation of this new group, American Securities Association, accompanied by strong words against the big players suggests that perhaps bigger fissures are forming in the Wall Street edifice. RIAs can pretty much kick back and watch.

In what may reveal factional cracks forming among stock brokerages, a group of non-wirehouse broker-dealers, including Raymond James, William Blair, Stifel and Stephens Inc., is banding together in an association that keeps “middle market” firms from becoming drowned out by Wall Street.

Based in Washington D.C., the American Securities Association debuted today with a clear message that it believes its interests are being trampled by lawmakers whose prescriptions for reforming Wall Street have run amok and are unfairly harming smaller broker-dealers that never endangered investors or the U.S. financial system. See: Smelling blood on Wall Street, genteel family offices are using the 'S’ word, study shows.

“They are Main Street firms subjected to a barrage of regulation since the financial crisis, even though they didn’t cause the crisis or pose systemic risk,” says Jon Teall, spokesman for the new group, in an email. “They wish to speak with one voice which is Main Street, not Wall Street.”

But today’s press release announcing the new group puzzled one industry observer.

“The jargon in the release does not seem to be aimed at Main Street investors, at least those that are unfamiliar with 'middle-market dealers’ or retail and institutional operations of its middle-market financial services firm members,” writes Brian Hamburger, founder of MarketCounsel LLC in Englewood, N.J.

Harmonized

Brian Hamburger: The jargon in the release does not seem to be aimed at Main Street investors. Brian Hamburger: The jargon in the
release does not seem to be
aimed at Main Street investors.

Also puzzling to a series of observers is the new group’s stance as it relates to the fiduciary rule, one that seems to be in line with existing pro broker-dealer interest groups such as the Securities Industry and Financial Markets Association and Financial Services Institute. See: New York conference: SIFMA wants members to be like RIAs — minus the same rules of accountability.

In fact, none of these groups evinces any tension toward each other or each other’s views.

Christopher Iacovella, CEO at Equity Dealers of America Iacovella sees the ASA in accord with SIFMA’s stance on the new DOL rules but notes that his association is certainly delving into the issue more deeply.

“We do find a fair amount in common with SIFMA,” he says. “We’re aligned with a recent editorial they wrote related to the impact on the Fiduciary Rule.”

SIFMA is down for that.

“SIFMA welcomes an additional voice on behalf of America’s capital markets,” said the group in a statement. “The founding members, many of whom are also active members of SIFMA, bring a unique and important perspective from which to advocate on critical issues affecting this important and highly regulated sector.”

FSI, meet ASA

FSI’s Chris Paulitz also welcomes a new group to the arena — if in a slightly backhanded manner.

“While I’ve never heard of this group, and most of these firms cannot be FSI members, I wish them the best. The more advocates speaking up for Main Street investors the better,” says the senior vice president of marketing, in an email.

Paulitz goes on to say that since some of the firms under ASA have an employee model rather than an independent contractor model, they are ineligible for FSI membership.

“FSI’s membership is comprised of independent financial services firms and independent financial advisors. This means our firm members are independent broker-dealers with independent contractor financial advisors who serve retail clients. We keep our membership criteria very specific so that our positions on advocacy are always crystal clear.” See: New FSI chairman isn’t sugarcoating FINRA’s shortcomings but blasts the SEC on porn and Blackberries in this letter.

The American Securities Association will act as an umbrella for the Bond Dealers of America, which has been around for eight years, and for the also just-launched Equity Dealers of America. See: An in-depth analysis of FINRA’s attempted takeover of RIAs and why the group should be disbanded, Part 2. Right now, there are 11 founding members.

The Equity Dealers of America exclusively represents the equity market interests for retail and institutional operations of middle-market financial services firms. The Bond Dealers of America represents securities dealers and banks focused on fixed income markets.

Fiduciary stance

The jury is out on whether this new association will be boost the fiduciary rule or simply provide more ammunition for those lobbying against it, says Knut Rostad with the Institute for Fiduciary Standard in McLean, Va.

“On its face, seems to be a simple effort to shed the baggage of the big firms,” he says. “A new group could be good; it could help stimulate much needed changes. 'Could’ is the operative word. And I don’t presume for a second they will. What I do believe is firms will respond to the DOL rule differently. Some will change; others will continue to resist.” See: As DOL contemplates stiff fiduciary-related penalties on advisors, NAPFA and FPA find rare concord with FSI.

Notable maiden members of the group include Raymond James Financial Inc. in St. Petersburg, Fla., William Blair & Co. LLC of Chicago and Stifel Financial Corp. of St. Louis.

Raymond James remains a member of FSI, a spokeswoman confirmed.

No slight intended

A spokeswoman for Boston-based LPL Financial says her firm was not invited to join the new organization. LPL is a member of FSI. See: LPL reconsiders FSI as it drops out of its board, offers own DOL stand and hires own lobbyist.

Christopher Iacovella: The rules were supposed to impact the firms that caused the crisis and they're impacting our members who didn't cause the financial crisis Christopher Iacovella: The rules were supposed
to impact the firms that caused
the crisis and they’re impacting our
members who didn’t cause the financial
crisis

But ASA says its pool of members came from the existing Bond Dealers of America and that there was no intent to freeze out any firm.

“With the exception of one firm, Wunderlich Securities, all of the firms in the new Associations are also members of the eight-year old Bond Dealers of America,” writes spokesman Jon Teall, whose firm serves as ASA’s public relations provider. “The firms launching the new ASA and EDA have talked for some time about forming the new groups and finally they did it. There was no attempt to exclude any firm and certainly not LPL. The new associations are eager to grow and will be reaching out to as many other firms as possible in the days and weeks ahead.”

Iacovella also says the association welcomes financial firms and that there is no specific criteria for prospective members. But he says that could change over time.

Improving the middle man

The premise driving the new association is that its members have been hurt by financial legislation that was aimed mostly at giant Wall Street firms. See: JP Morgan gets a 39-page blasting of its corroded culture and ground lost to Silicon Valley robos — authored by its CEO Jamie Dimon.

Therefore, Iacovella says, ASA’s guidelines ensure that the mid-sized financial firms won’t be harmed by new regulations. Why Obama and the DOL are all wet when it comes to the proposed fiduciary rule.

“After the financial crisis, rules were put in place by regulators but these rules have been implemented without regard to the business model or size of the firm. Quite frankly, what’s happening is these rules are starting to negatively impact companies in financial services that the rules were never intended to impact. All of this is starting to impact the middle-market firms. The rules were supposed to impact the firms that caused the crisis and they’re impacting our members who didn’t cause the financial crisis.”

Still, Iacovella declined to specify what rules are hurting middle market firms and what damage these firms are sustaining.

ASA chairperson, Curt Bradbury, who is also chief operating officer of Stephens Inc., a Little Rock, Ark. financial services firm, echoes the sentiment.

“Washington’s one-size-fits-all approach to industry regulation disproportionately harms our ability to drive economic recovery and job creation, which is vital to the regions we serve and surely is not the intended purpose. To remedy this, the ASA brings together the highest level of industry leadership who share a vision for proscriptive change,” he wrote in the group’s release.

More the merrier

Chris Paulitz: While I've never heard of this group, and most of these firms cannot be FSI members, I wish them the best. Chris Paulitz: While I’ve never heard
of this group, and most of
these firms cannot be FSI members,
I wish them the best.

Iacovella doesn’t have a set list of regulations his association will promote and lobby for, but they will comport with ASA’s central theme of ensuring middle-sized firms won’t be impacted negatively.

“Going forward, we want regulation to be smart and to take into account different business models.”

Iacovella sees the ASA in accord with SIFMA’s stance on the new DOL rules but notes that his association is certainly delving into the issue more deeply.

“We do find a fair amount in common with SIFMA,” he says. “We’re aligned with a recent editorial they wrote related to the impact on the Fiduciary Rule.”

“SIFMA welcomes an additional voice on behalf of America’s capital markets,” said the group in a statement. “The founding members, many of whom are also active members of SIFMA, bring a unique and important perspective from which to advocate on critical issues affecting this important and highly regulated sector.”

Wish you well

FSI’s Chris Paulitz, with also welcomes a new group to the arena — if in a slightly backhanded manner.

“While I’ve never heard of this group, and most of these firms cannot be FSI members, I wish them the best. The more advocates speaking up for Main Street investors the better,” says the senior vice president of marketing, in an email.

Paulitz goes on to say that since some of the firms under ASA have an employee model rather than an independent contractor model, they are ineligible for FSI membership.

“FSI’s membership is comprised of independent financial services firms and independent financial advisors. This means our firm members are independent broker-dealers with independent contractor financial advisors who serve retail clients. We keep our membership criteria very specific so that our positions on advocacy are always crystal clear.” See: New FSI chairman isn’t sugarcoating FINRA’s shortcomings but blasts the SEC on porn and Blackberries in this letter.

Right now, the new groups don’t appear to have specific criteria for membership. Iacovella declined to offer the costs of the association.

Full membership is granted to any financial institution that is active in the U.S. equity capital markets through financial planning, investment banking, equity research, sales or wealth management. Associate membership is for service providers to financial services firms that are active in the U.S. equity capital markets and the wealth management business. These include accounting firms, consulting companies, technology and software providers.


Mentioned in this article:

Raymond James Financial Inc.
Asset Custodian
Top Executive: Bill Van Law



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Stephen Winks said:

February 25, 2016 — 12:42 AM UTC

The old regional firm Roundtable (Wheat First, Alex Brown, Robinson Humphrey, Advest, Butcher & Singer, Blunt Ellis Loewi, William Blair, Dain, Rauscher Pierce, Foster Marshall, Raymond James, Bateman Eichler, Boettcher, Sutro, Prescott Ball &Turpin, Morgan Keegan, AG Edwards, Edward D Jones, DA Davidson, Chicago Company, and a few others) were uniquely client centric in ways foreign to Wall Street. Wells Fargo built out of a series of Wheat First acquisitions now is comprised largely of these firms with Raymond James acquiring a few. The unique aspect of these firms is that they retained their local identity and were dominant in municipal finance and were a very powerful distribution syndicate in corporate finance. They were very concerned about the well being of their clients and their communities and were good corporate citizens. That connectivity with the consumer has been lost when it is most needed today to advance fiduciary duty. What is troubling is that many of these firms today are the most aggressive opponents to fiduciary duty when in fact their devotion to the client’s best interest years ago is an important part of their DNA and is what made them great. A lot of pride in building a “quality firm” is now transferred to RIAs who now hold the high ground. RIAs will have similar success to the old regional firm roundtable as the client’s best interest is their driving force. Perhaps the Zero Alpha Group or other assemblages of high level RIAs with extraordinary technical competency can emerge as the client centric alternative to Wall Street to advance professional standing in the client’s best interest—triggering massive market share and industry redefining market leadership. Roll-ups have largely ignored fiduciary duty creating a vacuum that needs to be filled.

SCW
Stephen Winks


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