More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
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.”