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 December 15, 2006
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| We
wish you happiness and good cheer during whatever holiday you celebrate
this time of year! |
NASD/NYSE MERGER BATTLE – The Securities Industry and
Financial Markets Association (SIFMA) is supporting the proposed merger
of the regulatory functions of the NASD and NYSE. However, the
Financial Industry Association and the Independent Broker-Dealer
Association are calling for a rejection of the proposal and the
resignation of NASD CEO, Mary Schapiro. Some life insurers are
also expressing concern about being burdened with expensive new rules
as a result of not being significantly included in the rulemaking
process.
MORE ON BROKER
OVERTIME – At the request of the Securities Industry and
Financial Markets Association, the Department of Labor has ruled that
brokers are not entitled to overtime pay. Unfortunately the decision
came too late for Merrill Lynch, which just agreed to settle its
overtime suits with brokers for undisclosed millions and for Morgan
Stanley, which settled with about 5,000 brokers in California for $42.5
million. Further, UBS and Smith Barney paid brokers nationwide $89
million and $98 million, respectively, to settle their overtime
complaints.
SEC TO RULE ON EIAs
– In the next few months, the SEC will clarify whether equity
index annuities are securities or insurance products. By issuing a
clarification, the SEC hopes to eliminate confusion created last year
by NASD's guidance on the matter. In that guidance, which was released
in August 2005, NASD suggested that brokerage firms begin supervising
sales of equity index annuities. Fueled by demand from aging baby
boomers, sales of equity index annuities soared in 2004 and 2005. More
recently, however, sales have begun to drop off as the products have
come under fire for being too complicated and have become the subject
of scrutiny by regulators.
MORE SEC NEWS
- The SEC is proposing changes to the Sarbanes-Oxley Act (SOX) that
would provide some regulation relief to smaller businesses. In
addition, the SEC is proposing that minimum net-worth requirements for
hedge fund investments be increased from the current $1 million to $2.5
million, excluding real estate holdings.
TORT COSTS -
A Tillinghast study puts total U.S. tort costs for 2005 at $261
billion...approximately $880 per person, but less than the $884 per
person in 2004 U.S. tort costs.
BIG BUCKS AT GOLDMAN
SACKS - Goldman Sachs' profit soared in the fourth quarter and
the world's largest investment bank set aside $16.5 billion for
bonuses, amounting to a 40% increase from last year...average of
$622,000 per employee.
UBS FRAUD ALLEGED
- New York Attorney General Eliot Spitzer is targeting UBS's retail
brokerage unit for defrauding thousands of consumers by pushing them
into inappropriate accounts. Spitzer claims the accounts, which charge
an annual fee based on assets, were inappropriate for clients who
traded infrequently.
FED HOLDS RATES
– Due to the fact that the decline in U.S. housing markets was
"substantial," the Federal Reserve held interest rates steady at 5.25%.
It has been almost six months since the Federal Reserve last changed
interest rates and some believe it could go a full year before it
tinkers with rates again.
MUNI BOND
INVESTIGATIONS – Watch for the Justice Department and SEC
to begin probing players in the municipal-bond market. It could be big
and nasty since one bond attorney commented, "This is the first time I
have ever seen the antitrust division of the DOJ get involved in public
finance."
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JEFFERIES' GIFTS - Jefferies &
Co. will pay $9.7 million to settle charges it illegally sought to
manipulate brokers at Fidelity Investments by spending millions of
dollars on gifts, including $46,000 to fly one Fidelity trader and his
wife to St. Thomas, more than $70,000 to fly another trader to Los
Angeles for his honeymoon, $75,000 for a Miami bachelor party (which
featured dwarf tossing and other "fun" drinking games), $225,000 for a
golf outing and a dozen bottles of wine at $625 a pop.
FIDELITY'S INFIDELITY
- According to court papers, Fidelity Investments may have "directly or
indirectly" defrauded some clients during the period from 2002 to 2004
and those actions may have kept Fidelity customers from obtaining the
best deals possible on stock trades. Do you think those gifts from
Jefferies had anything to do with it? Our question is why the
individuals receiving these "gifts" aren't required to pay taxes on
them?
MORE FIDELITY - Fidelity Investments
is the latest target of a lawsuit alleging that Deere & Co. 401(k)
plan participants were charged "improper, undisclosed and excessive
fees."
BIG BANK MERGER – The Bank of
New York will buy Mellon Financial for about $16.5 billion and create
the world's largest custodian of assets for institutional
investors...$16.6 trillion in assets under custody and $8 trillion
under trusteeship.
CYBER-ATTACK FROM AL-QAEDA - The
government warned American private financial services firms of an
al-Qaeda call to launch a cyber-attack against online stock trading and
banking websites lasting until the end of the month. Al-Qaeda websites
are encouraging "denial of services" attacks on financial services
websites. A "denial of services" attack inundates a server with
excessive email, which can potentially cripple a website by stopping
traffic or preventing access to the site.
EXECUTIVE PAY
– Maybe times are changing. The SEC has issued some new rules on
executive compensation and major investors, shareholder groups and
credit-rating agencies are zeroing in on how boards make decisions
about CEO pay in particular. Is executive pay out of control? You be
the judge. Check out the 31 members of the Forbes
$100 Million CEO Club. (William W. McGuire of UnitedHealth Group
leads the pack with $1.6 billion...yes, billion!)
NASD AND LIFE SETTLEMENTS - In
August 2006, NASD issued a statement to broker-dealers on treating Life
Settlements as Securities and the impact on how registered
representatives conduct business. The most vital aspect, in the opinion
of the NASD, is that the broker-dealer must always be attentive to the
entire process of the transaction - from purchase to execution to
compensation. If a life settlement and security are both purchased, the
transactions then fall directly under security laws.
BIG REFUND ORDERED
- NASD hit Edward D. Jones, RBC Dain Rausche, Royal Alliance and Morgan
Stanley with fines totaling $850,000 and ordered them to pay $43.8
million in remediation for failing to pass along discounts to investors
who bought mutual fund shares.
HOSTILE BID - Appealing directly to
London Stock Exchange shareholders, Nasdaq is launching a $5.3 hostile
takeover bid for the LSE. Since Nasdaq already owns 28.75% of the
London Stock Exchange, it needs just 21.3% of LSE shareholders to
accept its bid in order to take control of the exchange.
ECONOMY STRENGTHENING – U.S.
employers added 132,000 jobs to the economy last month, topping
forecasters' expectations and pointing to a strengthening economy. The
average hourly wage for non-management rose three cents to $16.94, but
the unemployment rate crept up to 4.5% after hitting a five-year low of
4.4% in October.
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HSAs EXPANDED - Congress has passed
and President Bush is expected to sign legislation that will expand
Health Savings Accounts by repealing the annual deductible limit on HSA
contributions. Currently HSA contributions are limited to $5,450 per
family ($2,750 for individuals) or the deductible of the health
insurance policy held, whichever is lower. The pending
legislation will allow contributions up to these amounts, even if the
policy has a lower deductible. Some expired tax breaks were also
resurrected by this legislation, including the state and local sales
tax deduction, the college tuition deduction and the teacher's
classroom expense deduction.
BOOMERS DELAY
RETIREMENT – A study by The Center for Retirement Research
at Boston College reports that one in four baby boomers will not have
the financial resources to retire on time and likely will have to work
at least two extra years. Currently, boomers in their 50s have median
assets of just $60,000 and Social Security qualifications have been set
so that the longer workers delay collecting benefits, the higher they
will be.
SOME CAN'T DELAY
RETIREMENT - A study by Sun Life Financial reveals more than a
fifth of all Americans are forced into early retirement, usually by
layoffs and cutbacks at their companies. Losing their jobs, on
average about eight years early, leaves them ineligible for Social
Security, unprepared for the future, and with half the savings they had
expected for retirement, the study showed.
12 TAX TIPS
– Here are some year-end tax planning tips from Bankrate.com.
Click on any of interest for details.
1. Get
in the giving mood
2. Evaluate
your portfolio
3. Let
your home help you out
4. Embrace
energy efficiency
5. Go
for better gas mileage
6. Flex
your spending account muscle
7. Maximize
medical deductions
8. Make
early miscellaneous payments
9. Shift
incoming income
10. Tend
to your retirement
11. Examine
education payment options
12. Check
your withholding
TAX TIPS FOR
SCHEDULE C FILERS – If you are among the many advisors who
file a Schedule C, here are tax tips for you. First tip...be careful!
The IRS says it's ready to focus on taxpayers who run small,
unincorporated businesses. Other tips: Buy some equipment...you can
expense up to $108,000 for assets that are bought and used during year.
Pay bills now and get paid later...consider paying as many of your
business expenses as you can. Don't forget health-insurance
premiums...medical insurance premiums and long-term-care premiums are
deductible for self-employed individuals. Set up a retirement
plan...contribute if you already have one.
STATE INCENTIVES FAIL
- A University of Hawaii researcher has concluded that state tax
incentives and partnership programs to promote the purchase of
long-term care insurance have failed to do so. Instead, based on
this research, the primary motivating factor behind the purchase of LTC
insurance appears to be the availability of children for caregiving
purposes...a higher availability of children results in a more limited
market for LTC insurance.
TAX POTPOURRI
- Here are some predictions for tax measures likely to be passed by
Congress in 2007: alternative minimum tax relief, continuation of
the estate tax with higher exemptions, and some mix of tax deductions
for LTC insurance and tax credits for caring for those with LTC
needs.
MILLIONAIRE BLUES
– The Spectrem Millionaire Investor Index reveals that
millionaire investors are losing a bit of their confidence. Reasons:
The Republicans' loss of Congress and worries about the war in Iraq.
BANK OF AMERICA
EXPANDS FREE TRADES - Bank of America is expanding the number of
states where they allow investors free online equity trades as long as
they keep at least a $25,000 account. The program will be nationwide by
the end of March.
PLANNING AND HEALTH
CARE COSTS – Health care costs have become so expensive
that it is a major consideration in personal financial plans. So much
so that many financial institutions are bringing in experts to train on
potential health care costs.
VARIABLE ANNUITY
SALES UP - The National Association for Variable Annuities
reports that variable annuities attracted $9.3 billion more in cash
than they lost during the third quarter, up from $4.7 billion for the
third quarter of 2005.
FIXED ANNUITY SALES
UP ALSO - Beacon Research reports that sales of fixed annuities
rose to about $20 billion in the third quarter, up 9.9% from the total
for the third quarter of 2005.
EIA SALES SLUMP DUE
TO LEGAL FEARS - Equity index annuity sales were down for the
three-month period ended Sept. 30, the third year-over-year decline in
the past four quarters. The specter of tighter regulation - along with
product stigma from class-action litigation - continues to hurt EIA
sales.
MASS MIDDLE MARKET
IGNORED - SRI Consulting reports that most advisers tend to
focus their attention mostly on wealthy and affluent clients, but there
are opportunities with people who have less money. "There are advisers
who will tell you they're only interested in the high-net-worth
[market], but the mass market and affluent have money. They're not
millionaires, but there are more opportunities if you want to work with
people with smaller assets."
ELIMINATE EMPLOYER
HEALTH PLANS - Sen. Ronald Wyden, a member of the Senate Finance
Committee, is proposing legislation that would replace the group health
insurance system with a new, mandatory individual health insurance
system. Click here for details at the National
Underwriter.
NYL REPORTS -
A couple of units of New York Life have released some interesting
survey results. According to one, in addition to investment
recommendations, clients are looking for their financial advisors to
provide meaningful advice, build trust and attend to personal
needs. More information is available here.
Another survey reveals that "60% of [surveyed 401(k)] participants
agree that they're making correct investment decisions in their 401(k)
account. But at the same time, only about half of all participants feel
they know how much money they will need in retirement and less than 40
percent believe they're in a good position to meet financial goals when
they retire."
SPAM TO STAY
- Spam is filling up the Internet, and it's not going away anytime
soon. Reason: It's ridiculously cheap and only a tiny response rate is
needed for "success." For each e-mail, the spammer pays a cost and
receives a benefit. But there is an additional cost paid by the e-mail
recipient. Because spam is unwanted, that additional cost is huge--and
it's a cost that the spammer never sees. If spammers could be made to
bear the total cost of spam, then its level would be more along the
lines of what society would find acceptable.
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