Ameriprise
Interesting story in the Wall Street Journal about one of Ameriprise's top stock broker, A Star Broker, 'Virtually Unsupervised,' Puts Ameriprise Arm Under Scrutiny.
According to the story, "David McFadden is one of the top brokers at Securities America. How he achieved this feat is now the focus of a National Association of Securities Dealers investigation and recently contributed to a $22 million arbitration award against the firm, a brokerage arm of Ameriprise Financial Inc.For years Mr. McFadden courted employees of oil giant Exxon Mobil Corp. He boasted that he was a certified public accountant and told many of the employees they were set for retirement and promised impressive returns, according to documents filed in a 2003 arbitration claim.
His claims, however, didn't mesh with reality. His CPA certification had lapsed years ago, and several of his clients had to go back to work as he failed to deliver the rosy returns he promised."
The heart of the story appears to be Mr. McFadden's practice of putting his clients in mutual funds largely based upon how the fund would pay his compensation. Conflicts of interest is rife among professional advisors, but the current regulatory line of thinking is that if the conflict is disclosed, then there is no foul. We have already seen some academic work which calls into question this assumption. It will be interesting to see if this award is the beginning of a re-thinking about how to police conflicts of interest in the sale of mutual funds.
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