Posted: April 12th, 2016
Read the “Decision Point” section on page 425 (See Below) of the text (When Does Financial Support Become a Kickback). There are three bulleted questions at the end of the short excerpt. Answer all questions listed. Remember to restate the question, and then give your reply. I include the three questions I would like answered please.
Consider the case of what is referred to as “soft money” within the securities industry. According to critics, a common practice in the securities industry amounts to little more than institutionalized kickbacks. “Soft money” payments occur when financial advisors receive payments from a brokerage firm to pay for research and analyst services that, in theory, should be used to benefit the clients of those advisors. Such payments can benefit clients if the advisor uses them to improve the advice offered to the client. Conflicts of interest can arise when the money is used for the personal benefit of the advisor. In 1998, the Securities and Exchange Commission released a report that showed extensive abuse of soft money. Examples included payments used for office rent and equipment, personal travel and vacations, memberships at private clubs, and automobile expenses. If you
learned that your financial advisor received such benefits from a brokerage, could you continue to trust the financial advisor’s integrity or professional judgement?
1. What facts do you need to know to better judge this situation?
2. What values are at stake in this situation? Who gets harmed if a financial advisor accepts payments from a brokerage? What are the consequences?
3. For whom does a financial advisor work? To whom does she have a professional duty? What are the sources of these obligations?
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