One of the last acts of a dying civilization is to write a rule book. The next to the last act is trying to enforce it. The suggestions offered by Mary Shapiro and the SEC team as to pop quizzes for advisors makes little or no sense. It's sort of like Gun Control: the bad guys are always going to find ways to get them. The bad guys in the securities industry are going to find ways to misrepresent things to clients. Simply knowing a rule that says you shouldn't doesn't make it any less likely.
Nonetheless, Mary's heart is in the right place even if her brain is parked in neutral. Seeing as how she's probably pretty busy right now, I thought I would do the first quiz for her and then let her team improve on it. Here goes:
FINANCIAL ADVISOR POP QUIZ
1.A Bond is: a. A connection between two human beings, b. Something that a glue creates between physical objects, c.A spy created by Ian Fleming or d. Something the Government issues when it's spending too much.
2. Commingling means: a. Two people of the opposite sex connecting in some way, b. Mixing your assets with your clients, c. Mixing two different client's assets together or d. What you do at a cocktail party to network.
3.An Investment Policy Statement is: a. Plaintiff's exhibit no. 1, b. A plan for deploying assets until they are all gone, c.A guide to justify decision making, or d. A script for an investment sitcom.
4. A Registered Representative is: a. Someone who is licensed to sell investments, b. Someone who has been formerly associated with a multi-level selling group but now isn't, c. Someone whose alleged transgressions can be found on the web on their U-4, or d. Someone who could not get a job at Jiffy Lube.
5. Modern Portfolio Theory is industry jargon for: a. Explainng how investments should work even when they don't, b. Just a theory to explain why you have no money left, c. A course at Harvard, d. What every advisor should know and understand.
Obviously, the quiz could go on and on but since this is the first one, we should just let it be a warning of more difficult ones to come. I know if, as an investor, that if my rep were subject to this sort of intellectual scrutiny, I would feel much safer.
I know you would too.
