More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
Fallout from the botched Facebook initial public offering continues, which NASDAQ now counts as 30 million improperly executed shares. Industry behemoths Scottrade, Charles Schwab and Fidelity are feeling the heat from customers.
"Many investors have found that their orders for Facebook were not executed at the prices they thought, said advisers, who declined to be identified because they are not allowed to speak to the press,” according to the news service.
All Facebook stock trades in clients' accounts from May 18 have been confirmed, a Fidelity spokesman said. The following message was also attached to online customer accounts:
Special Notice to Customers Submitting Orders for Facebook Stock on Friday, May 18, 2012 Because of acknowledged problems at NASDAQ, some customers who placed orders for Facebook (FB) stock on Friday, May 18, 2012 may have experienced delays in status updates. This is an industry-wide issue that affected many different broker-dealers and other market participants. We realize that some customers still have questions about how these delays may have affected their trading activity. We understand that NASDAQ is working with federal regulators to determine what, if any, accommodation might be made. However, customers should assume that any shares of Facebook stock currently credited to their accounts are owned by them and available for trading. We will continue to work with the industry to get NASDAQ to come to a resolution that addresses the concerns of our customers.
“[R]etail investors have spent much of this week looking for someone to address their losses, or even just to answer questions about where they can take their complaints,” The paper notes. “The stockbrokers have generally said the problems were caused by Nasdaq, where technical issues delayed the start of trading by 30 minutes and mishandled large numbers of orders to execute or cancel shares.”
It goes on to claim that brokers like Scottrade have “almost universally declined to take direct responsibility for the losses their customers suffered. The frustration of these customers has played into a broader sense that small investors got the short end of the stick in the bungled Facebook offering.”
Whitney Ellis, a Scottrade spokesman, said the “issues were industrywide and beyond our control.”
“Clients who have shares of Facebook stock in their accounts can trade their shares at any time,” Ellis told The Times. “We have tried to address every client’s concerns on an individual basis and will continue to do so until everything has been resolved.”
Javier Paz, a brokerage analyst at the Aite Group told the paper that the liability for the losses suffered during the bungled IPO were in a murky legal territory and would probably “be decided in the courts.”