Who represents the investing public?

On 15 November 2010 the European Venture Capital Association hosts a conference in Brussels:   AIFM directive: What's next? The problem - as is so often the case when industry representatives and regulators meet - is that the investing public, the ordinary investor who is ultimately directly or through his fiduciaries in the fund management industry supplying the funds for all investments, is not represented at all as far as we can see. There are plenty of lawyers and accountants (as usual they smell healthy fee income thanks to an ever-increasing burden of regulation) but who speaks for the real investor who picks up the bill in the end? The organisations which one would hope to step into the gap are noticeable by their absence. Has no one remembered to invite them or can they not be bothered?

Punishments meted out at Companies miss target

Time and again we note that regulators hand out fines against companies that they have found to be guilty of transgressions. What is usually overlooked is the fact that this means that innocent investors are in effect punished for misdemeanors or even crimes that they were only responsible for in the most indirect fashion. The real culprits are the managers of the companies and in most cases they are able to get off lightly and even carry on in their roles at the same companies. Topical example: Hypo Niederoesterreich vor Millionenstrafe

Whose Gold coins do high-frequency traders pick up?

With respect to the benefits of shaving three milliseconds from the time an order reaches the market, Ben van Vliet, a professor at the Illinois Institute of Technology, has the following to say (Forbes Magazine, 27 Sept 2010): "Three milliseconds are close to an eternity in automated trading, this is all about picking gold coins up off the floor--only the fastest person is going to get the coins." If a statement like this is not a wake-up call to the regulators all over the world the individual investor (who ultimately is the owner of every penny invested in the financial markets even though the majority is managed for him by all sort of fiduciaries) has no chance to get fair treatment in the investment game. (17/09/2010)

Independent Investment Research under Threat

We are not able to confirm details in today's New York Times article about the lack of supportfor Dick Bove. BankAtlantic, a Florida bank, sued him, accusing him of defamation after he wrote a report about the banking industry in July 2008, just as the financial crisis was starting to boil over. The bank contended that the report falsely suggested that the institution was in trouble.
But if his claim that several associations that represent stock analysts or the securities industry declined his requests to help him pay his legal bills it leaves a sour taste in the mouth - to say the least. What use are the Securities Industry and Financial Markets Association, the New York Society of Security Analysts and the CFA Institute if they decline to make a stand for independent investment research. To cap it all, they declined to comment when approached by the New York Times. Even worse - the investment bank Ladenburg Thalmann, his then employer, chose to settle its end of the case by paying BankAtlantic $350,000, without admitting to any wrongdoing, and leaving Mr. Bove to defend himself.  We are glad to report that Bove won his court case against the Bank but is still left with legal bills totalling $800,000. The stakes in a case like this are high as any successful lawsuit against an analyst would deter critical analyst comments in the future and stifle independent research. (12/09/2010)

Are Media Investors responsible?

The controversy about the role of the media in the United States leads to the question about the responsibility of  investors for keeping the public domain free from distortions of the truth that is only designed to support a political view. Of course, it has always been accepted that a newspaper or other media product is partisan and states which aims it supports. But in a case where a media product aims to distort the facts and make political hay on that basis we doubt that the shareholders can claim innocence - especially if they are institutions that manage the money of the wider public as fiduciaries - pension funds, mutual funds and insurance companies. Socially responsible investment does not just mean to avoid tobacco companies or defense contractors, it also means a wider social responsibility like upholding minimum standards of morality and truthfulness in the public domain.(11/09/2010)

Pensions not secure from political meddling

Anyone who believes in the politicians' assertions that pension savings are safe from political meddling would be well advised to take note of news that Local authorities here in the UK are considering to use pension funds to finance infrastructure spending. To make matters worse, the citizens are deprived of any means to influence these decisions which could have a major impact of their standard of living during their retirement. We expect political pressure to raid pension funds to increase as the fiscal situation in most countries continues to deteriorate. (03/09/2010)