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Regulation and Compliance > Federal Regulation > SEC

Editor's Note: Another Modest Proposal

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Harry Markopolos, one of our 30 most influential people in the independent advice business over the past 30 years that Investment Advisor has been published (see page 34) was not the first person to point out that the problem with the SEC is not that it doesn’t have enough people. No, he and others have pointed out that the problem is that the SEC has too many of the wrong people, notably attorneys who might understand securities law, but who do not understand the actual securities that the large financial services product makers foist on an unsuspecting public. So sorry, did I use the word “foist”? The truth is that some of the products that got us into the financial crisis of 2008-2009 that we and our children will be paying for in the form of higher taxes and slower growth for some time to come weren’t too complicated for everyone to understand, even if the heads of the big Wall Street investment banks, I mean brokerages, I mean commercial banks, couldn’t quite get their arms around those products.

Mr. Markopolos’s great contribution to this profession which you practice came from demonstrating that the SEC failed spectacularly in one of its dual duties: protecting investors. He-who-shall-not-be-named stole billions of dollars, and Markopolos kept warning the SEC that Mr. M’s claims were so patently false as to be preposterous, but the SEC didn’t listen (FINRA wasn’t exactly as spotless as Caesar’s wife in this sordid tale either, but that’s a story for another time). For Mr. Markopolos’s (pronounced “MARCO-POLOES” by the way) suggestions on how to fix the SEC, see his interview in this month’s cover story by Melanie Waddell. In fact, we are a bit proud of the fact that many of the most influential people of the past 30 years–such as John Bogle and Mark Tibergien and Amy Domini and Tom James and Sheryl Garrett and Ken Fisher–were kind enough to share their insights on the past–and future–with you through interviews in the cover story and online at

There was one group that suspected how toxic those products were: you. In fact, no one else does better due diligence on just about any product–from plain vanilla index mutual funds to highly leveraged hedge funds. In a recent conversation I had with Jeff Montgomery of the asset management firm once known as Al Frank and now, after some expansion, as AFAM, he reported that advisors are being much tougher with asset managers, and are asking those tough questions much more frequently. Moreover, when it comes to protecting your clients from the snake-oil salesmen wearing sharkskin suits, nobody’s tougher than you, I would argue. No one is kinder to their clients yet more suspicious of product providers than the independent advice giver that we are proud to serve here at Investment Advisor.

So my not-so-modest proposal is that you give a hand to our benighted Federal regulators and extend your protective umbrella to the entire American investing public by agreeing to serve on an advisors’ advisory panel that will get to vet every new investment product coming down the pike before that product can be sold, sorry, offered as a solution, to your clients. I mean, if you’re not part of the solution, you’re part of the problem, as I recall hearing 30 or more years ago.


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