In Focus
September 14, 2002
 
nscrupulous stockbrokers" earn their way to the Number 2 position in this year's "Top 10" Investment Scams as listed by state securities regulators (NASAA). "Analysts Research Conflicts" finishes in Third Place this year. The only group perpetrating worse investment scams, and receiving top prize, are unlicensed individuals ("scam artists") who typically are criminally prosecuted and usually end up in jail.
Who would have predicted this shameful "honor" for stockbrokers, research analysts and their brokerage firms?
To put this "award" in perspective, this group came in ahead (or behind, in terms of investor abuse) of ponzi schemes involving promissory notes and "prime bank" investments. When apprehended, tried and convicted, those scam artists go to jail for a very long time.
Indeed, one commentator recently opined that Merrill Lynch was no different than a "boiler room" of the '90s, because its brokers were an integral part of a well-oiled and highly orchestrated sales machine to churn out IPOs and rely upon Merrill analysts such as the infamous Henry Blodget, who hyped the stocks publicly with "Buy" recommendations (and derided them privately). Not to pick on Merrill, other major brokerage firms recently have had their full share of the "limelight" as well.
Is jail time in store for our Wall Street friends? Not for a while, anyway. Instead, investors will need to rely upon filing securities arbitrations to recover investment losses, and will need to avoid "pennies on the dollar" recoveries in class action litigation.
But we can still hope for sanctions that will make our "honorees" think twice before committing the next scam. Meanwhile take a look at NASAA's "Top 10" list.
— James J. Eccleston
FinancialCounsel.com
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