Conflict of interest in financial advisor?
Question:
Answer:
First, NOBODY knows any "sure profit stocks". Second, just because one person buys a stock does not make it so that another person cannot buy a stock. Third, an advisor IS able to own what the clients own...he/she just cannot trade in front of a client.
Nothing, if he's got the money. But he makes even more money if he invests wisely for himself AND his clients.
It is called insider trading and that my dear is punishable by going to a nice comfortable cell in a penitentiary. So they really are not going to take that chance unless it means very very big bucks !!! ((giggles)))))))))))))
Investment advisors must file with the NASD, the states they practice in and under certain circumstances the SEC, and give to their clients, a disclosure form called an ADV, These are some of the questions on that form.
Do you or any related person:
(1) buy securities for yourself from advisory clients, or sell securities you own to advisory clients (principal transactions)?
(2) buy or sell for yourself securities (other than shares of mutual funds) that you also recommend to advisory clients?
(3) recommend securities (or other investment products) to advisory clients in which you or any related person has some other proprietary (ownership) interest (other than those mentioned in Items 8.A(1) or (2))?
This doesnt mean they cant own the same investments. It means they have to disclose if they do. Investment advisors have a fiduciary responsiblilty to act in the best interest of their clients. Stock brokers do not. Advisors have to have a contract between themselves and their clients. Stock brokers do not. So its like another poster said. If an advisor violates anything in the ADV or the contract they can be fined and possibly go to jail. Stock brokers may also, but since they have no fiduciary responsibility its probably less likely. You may sign forms when you open an account with a stock broker, but those are more of a release on their part, not a contract.
Well first of all the most obvious answer is that there is no such thing as a sure profit stock. All stocks have some degree of risk. Secondly, there are plenty of shares for an advisor and his/her clients. It would be a strong recomendation for an advisor to tell his/her client that they are putting there own money into the same investments they are recomending. Thirdly, for the person who thought this would be insider trading. Insider trading is when someone buys or sells a stock based upon information that is not available to the general public. It has nothing to do with an advisor buying shares.
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