The SEC’s Office of Investor Education and Advocacy is publishing this Investor Bulletin to educate investors about the use of margin accounts to buy securities, including the related risks. The Difference Between Cash and Margin Accounts A “cash account” is a type of brokerage account in which the investor must pay the full amount for securities purchased. An investor using a cash account is not allowed to borrow funds from his or her broker-dealer in order to pay for transactions in the account. A “margin account” is a »
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(Updated with additional comments from company executives on a conference call.) First-quarter profit at Morgan Stanley’s wealth management division rose 19% to a record $1.2 billion in the first quarter as the company continued to reap the benefits of emphasizing fee-based assets and lending. Revenue at the wealth unit rose 8% to $4.4 billion from $4.1 billion a year ago, representing 39% of its parent company’s $11.1 billion in revenue for the quarter. The division’s pretax net income from continuing operations of $3.4 »
With regulators zeroing in on reverse-churning, and lawsuits popping up around the practice, advisers should be paying attention. The concern stems from conflicts of interest that advisers face when deciding whether to move clients from commission-based accounts to often more expensive fee-based accounts (depending on how much trading occurs, which additional services are provided and how much the fee is). But some advisers have felt pushed in that direction regardless of the circumstances, especially in retirement accounts, because »
Four Edward D. Jones & Co. customers have filed a class-action lawsuit against the company and its executives, asserting that its aggressive promotion of fee-based advisory accounts is an illegal “reverse churning scheme” benefiting the firm at the expense of investors. The complaint, filed in federal court in the Eastern District of California on March 30, said the firm has pressured its more than 16,000 brokers to switch their largely middle-income brokerage customers from commission accounts into advisory accounts that »
A $9-million trio of UBS brokers in Houston left last week to form an independent advisory firm, betting they can retain the bulk of their ultra-rich family clientele in spite of the firm’s recent exit from the Protocol for Broker Recruiting. Brian Bova, David Leeds Eustis and Marc Oster, managing directors who had each been at UBS for at least 15 years, have set up Inscription Capital as an advisory firm, financing the transition with money from GPS Investment Partners, a private equity firm in New York, according to several »