Friday, August 17, 2007

Bear and its Brokers

On Wall Street raises an interesting question - "Will Bear's Woes Eat Into Broker's Wallets?"

While the article discusses the impact of the subprime woes on Bear Broker's personal portfolios, the real impact of this debacle is going to be the litigation, arbitration and regulatory fallout.

Brokers are usually the fall guys in market debacles. Just look back to the market timing cases and the research cases. The front line of the investor litigation and the regulatory push were the retail brokers. Firms threw their own brokers under the bus, in an effort to save the firm, and its management.

Now, we have subprime. And of course, it is going to be the broker's fault that customers invested in such vehicles - who else is going to bear the blame without putting up a significant fight?

Smart brokers are reviewing their client's portfolios, gathering documents to demonstrate that the recommendations and representations were made by the firm, and getting defense counsel lined up for the onslaught.
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