SEC ENFORCEMENT ACTIONS
Gary Beynon, owner of Omni Investment Advisors, agreed to pay a $50,000 penalty to the SEC and be barred permanently from acting in any compliance or compliance supervisory capacity within the securities industry, after the regulator found that the Draper, Utah, firm lacked written policies and procedures in place to prevent, detect and correct securities laws violations. The SEC action also cited Feltl & Co. in Minneapolis for similar violations. The regulator fined that firm $50,000 and ordered it to return $142,000 to certain advisory clients.
HEARTLAND HAILS DIVIDENDS
Clients and advisors looking for ways to preserve principal and boost yields in their portfolios should parse dividend-paying stocks carefully, Heartland Advisors says in a recent review of historical dividend returns. Heartland warns against investing in the highest-yielding stocks while ignoring the capitalization, sector and style concentrations that would result from that strategy. A portfolio favoring allocations to high-yielding sectors at the beginning of 2008 would likely have heavily overweighted financial services stocks heading into the financial crisis.
Also, investors should avoid yield traps. This can happen when dividend yields are unsustainably high, and are usually the result of a substantial drop in the price of a dividend-paying stock. Nonetheless, dividend stocks are still quite promising: From 1802 to 2002, according to a separate report, dividends accounted for nearly three-quarters of the 7.9% total annualized return of U.S. stocks.
DYNAMIC AFFLUENT CLIENTS
Financial advisors are a top source of financial guidance for 63% of mass- affluent Americans surveyed by Bank of America Merrill Edge. Further, 50% of respondents said receiving advice from a qualified advisor has increased their confidence in their ability to meet their financial goals.
Half avidly embrace online banking and investing services, meaning advisors who still want to deliver solid time-honored financial advice to this group, with $50,000 to $250,000 in investable assets, will have plenty of ways to get through to them.
ON THE MOVE
Raymond James announced several new appointments to its senior leadership team. The firm has promoted Dennis Zank to serve as its parent company's chief operating officer. Zank is currently the president of the Raymond James & Associates unit. Scott Curtis will serve as president of Raymond James Financial Services and managing director of the firm's independent contractor division.
Allianz Life Insurance has named Darcy Matz as its director of customer events and sales development. Matz will lead the creation and delivery of sales and professional development programs for internal and external sales consultants, as well as wholesalers and retirement consultants in the field. Previously, Matz led national advisor recruiting at Securian Financial.
Dana Rekow and Susan Talton have been promoted at Seattle-based Laird Norton Tyee. Rekow is now managing director of client services; Talton is a client advisor and leader of the firm's elder planning group. Rekow, who joined the firm in 2009, had been the senior client executive for the retirement sales division of Russell Investments.Talton, who joined Laird Norton in 2008, was a financial consultant at Smith Barney working from the firm's offices in Charlotte, N.C., and in Scottsdale, Ariz. - D.M.
GLOBAL X LAUNCHES SOCIAL MEDIA ETF
Global X Funds has launched the Global X Social Media Index ETF (SOCL), which it says is the first ETF that will focus on social media companies on a global scale. The fund will cover companies that offer social networking, file sharing and other web-based media applications.
Global X noted that a survey by the Pew Research Center shows that, in 2011, 65% of adult Internet users used a social networking site, nearly double the percentage in 2008. Nearly 84% of Fortune 100 companies are using branded social media, according to Burson-Marsteller, and nearly one-third of small businesses in the U.S. are using social media. The fund tracks the Solactive Social Media Index, whose three largest stocks are social networking companies DeNA of Japan, and China's Sina and NetEase.com. - Lee Barney
REGULATORY CHANGES & VOLATILITY TOP CONCERNS FOR RETIREMENT ADVISORS
Retirement plan advisors' top five concerns include new disclosure rules, market volatility, finding greater flexibility and customization in plans, measuring a given plan's success and an expected redefinition of fiduciary status. Those are the results of a national listening tour conducted by Transamerica Retirement Services.
"We met with retirement plan advisors from across the country to discuss the top challenges and opportunities currently facing their clients," Jason Crane, senior vice president and national sales director for Transamerica, said in a statement. In addition to a focus on guiding clients through volatile markets, "plan advisors confirmed that they require flexibility from retirement plan providers to meet their clients' needs in this ever-changing environment," Crane said.
The regulatory change of most concern is the April 1 deadline for 408(b)(2) fee disclosure rules. Advisors are "expanding their efforts on fee education and transparency related to all plan services," Transamerica found. - Danielle Reed
SEC, FINRA: BROKER-DEALERS NEED TO KEEP CLOSER TABS ON BRANCH OFFICES
FINRA and the SEC issued a joint risk alert and regulatory notice, advising broker-dealers to make sure they're mindful of what's going on within their branch offices. The regulators even offered some tips to ensure they remain in compliance.
"A robust process for self-inspection of branch offices is a critical element of a firm's compliance and supervision process, and a vital part of a comprehensive risk management program," Carlo di Florio, director of the SEC's Office of Compliance Inspections and Examinations, said in the alert, adding that the regulatory agencies have unearthed "major deficiencies" during recent broker-dealer branch inspections.
"An effective risk-based branch office inspection program is an important component of a broker-dealer's supervisory system and, when constructed and implemented reasonably, it can better protect investors and the firm's own interests," Stephen Luparello, FINRA's vice chairman, said in the alert. "FINRA encourages broker-dealers to review this guidance and consider enhancements to their own branch office inspection programs." - Larry Barrett
FINRA SANCTIONS 10 INDIVIDUALS, 8 FIRMS OVER PRIVATE PLACEMENT SALES
FINRA has sanctioned eight firms and 10 individuals for selling interests in private placement offerings "without having a reasonable basis for recommending the securities," the regulatory agency said in a statement. The sanctions included ordering more than $3.2 million in total restitution to clients.
The firms and individuals sold interests in high-risk private placements such as those issued by Provident Royalties, Medical Capital Holdings, and DBSI. These private placements "ultimately failed, causing significant investor losses," according to the statement.
According to FINRA, the broker-dealers did not have adequate supervisory systems in place to assess the risks of these offerings. Many of the firms "failed to conduct adequate due diligence," according to the statement. "These actions reinforce that any firm or individual who fails to conduct reasonable investigations of these offerings, especially in light of multiple red flags, will not be allowed to shift all the responsibility to the issuers of the fraudulent private placements," Brad Bennett, FINRA's executive vice president and chief of enforcement, said in the statement.
NEXT Financial Group of Houston was ordered to pay $2 million in restitution to affected customers and also fined $500,000 in connection with the sale of three Provident Royalties private placements. Barry Knight, president of NEXT Financial Group, said in an interview that the firm is "very pleased to have this difficult matter be resolved and to be moving forward with our company, culture and ability to serve our representatives and customers intact." - Danielle Reed and Margarida Correia