What has the FSA ever done for us?

CISI: Up to 6,000 seasoned wealth managers must requalify for RDR

Here is the link http://www.citywire.co.uk/wealth-manager/cisi-up-to-6000-seasoned-wealth-managers-must-requalify-for-rdr/a467950?ref=wealth-manager-regulation-list

CoeurDeLion87 comments as follows;-

“The professional body stressed the number of practitioners needing to requalify would not exceed 6,000 because level four was formerly the base qualification for advisers working with private clients prior to the creation of the FSA in 2000.” This phrase is NOT actually true. Prior to 2000 there were many seasoned stockbrokers who were given Secs Institute membership waivers by the Securities Institute as it was called then and the SFA, the forerunnerof the FSA approved of these waivers. Many were former Members of the Stock Exchange and some like myself were labelled as part of the “marzipan layer”. All these ‘000s of personnel were and still are experienced personnel. The phrase Level 4 or for that matter any level was invented for RDR by the super-regulator FSA. From the demise of the old exchange till these experienced personnel supported the Secs Institute’s introduction of exams in the early ’90s there was no examination process amongst stockbrokers. The regulatory world was in chaos after FSA 1986 Act and appears to be in chaos again with the EU attack on ‘execution’ broking, the FSCS levy surcharge and the intolerable attitude to experienced personnel by FSA, CISI and firms who appear to be supporting RDR which in essence is an attack on the client bases of some very respected investment advisers. MANY OF US FEEL AS THOUGH WE’RE ENTERING A WAR ZONE. 


When the Securities Institute was formed in the early ’90s over 3,000 former Members of the Stock Exchange transferred their memberships to this new body, now the CISI, which was set up to protect their interests. Looking at the maths it would seem that many of the 3,000, those who have not retired or who are dead, have decided NOT to undertake the RDR bureaucratic process. This is a final nail in the coffin for true private client broking unless the RDR process can be halted. Many of us feel that the whole ‘wealth management’ process has gone beyond a joke which is creating a pidgeon holing of those who want to simply provide bespoke broking of portfolios. There are 100’s of ‘000s of investors effected by RDR and I do believe that FSA has completely misunderstood the dynamics of this orwellian exercise.

Having worked in the broking industry since around 1979/80 I am appalled at the way that seasoned practitioners are being treated and targeted here by hair brained regulators who clearly have no idea of how the market operates or what investors require. Where is the evidence that investors require over-qualified practitioners? What people do need are seasoned and experienced practitioners and the 3,000 or so defined by CISI need some support now. A few have suggested that RDR qualifications may be an infringement of Human Rights but they certainly are a restraint of trade towards those with very adequate experience.




Am I the only one in the City who is absolutely flabbergasted by the announcement today from the super-regulator, the FSA? I hope not otherwise we’re all in trouble.

Here is the link http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/008.shtml

QUOTE from the FSA link…

Sheila Nicoll, the FSA’s director of conduct policy, said:

“Rebuilding trust between customer and adviser is absolutely vital for the future prosperity of the retail investment market.” 

***So where is the breakdown of trust between independent advisers and clients? It’s appalling to think that this is being said when everyone knows that any client is free to seek advice from anyone in or outside the financial services world. If one doesn’t like the adviser one goes elsewhere***

There are so many things going wrong here frankly I haven’t got the breath to elaborate further suffice to say that millions of british men and women fought two world wars to safeguard our freedom. It seems that the policies adopted and put into practice today by FSA are more akin to soviet doctrine. When is someone going to stand up to this appalling arrogance and nonsense? Where are you Mr Cameron? Your late father was a respected stockbroker. Surely you can see the futility of this chirade?



Review 4Q 2010 10th January 2011

“I think the dot-com boom and bust represented the end of the beginning. The industry is more mature today.” Carly Fiorina Chair & CEO of Hewlett Packard 

As 2010 has drawn to a close I’m trying to clutch at anything positive from what occurred last year. Despite swathes of Quantative Easing in the western world, a continuation of malfunctioning banking, near sovereign defaults in Greece and Eire not to mention the underlying fiasco in Iceland, continued unemployment, further unhelpful regulation and a host of other equally unproductive news including England’s failure to compete with an excellent bid by Russia for 2018 World Cup I am drawn to Goldman Sachs revaluation of Facebook. The quote above from Ms Fiorina appears to have been conveniently ignored by the 35,000 employees of America’s premier investment bank, itself bailed out by the Fed and now doing rather well at the expense of US taxpayers. A share of US$13bn amongst the ‘staff’ (av. $370,000 each) on a profits collapse of -40% is almost as spectacular as Blackbeard himself. Wikipedia says of Edward Teach, “Teach used his fearsome image instead of force to elicit the response he desired from those he robbed”. I can’t help feeling that an increase of $30bn in valuation for Facebook (“fb”) throughout 2010 to $50bn with purportedly $2bn of advertising revenues and not a single subscriber paying anything for the (socially useless) service should be of some interest to SEC but I’m not going to hold my breath. With the announcement from LinkedIn (a network site for business people again with no visible earnings) as well regarding its own intended IPO it would appear that “Dot.com Part 2 boom & bust” is nearly upon us. Out of a dozen people at a xmas dinner party 11 had used “fb” in 2010 (2 had deleted their accounts incl. myself) although none had ever seen an advert. It would seem that the descendants of Blackbeard did arrive on the american shoreline as once feared. To put Facebook’s valuation into perspective BP is today valued at $140bn (no thanks to the mess in the Gulf and Mr Obama’s meddling) and Tesco at $53bn (making some progress in China). Anyway 2010 wasn’t a great year despite the arrival of the iPad. Stock markets tended to remain buoyant throughout with a positive 4Q beckoning in new year prospects.

So what does the future hold in 2011? With the unnerving scale of sovereign debt(s), especially the mind boggling US$14.29 trillion overseen by the Federal Reserve and engineered by JPMorgan and Goldman Sachs (funny how that name keeps cropping up!), not to mention UK’s National Debt of c.£3 trillion (now who’s counting?) and the shenanigans in EU accounting practices (the PIGS sovereign debt issues are coming to a head!) perhaps some acknowledgement from politicians, bankers and regulators may be forthcoming but I’m NOT going to hold my breath on this issue either. Suffice to say that the “Day of Reckoning” must arrive before our grandchildren get saddled with the consequences. The scale of the numbers, the deficits (and let’s not forget the state of the 100 or so US municipals, equivalent to UK’s local councils, who are on the edge of the precipace) and the banking crisis (Lloyds & RBS are still at systemic risk despite the previous government’s intervention) coupled with a lack of grass roots real growth in the west could well get contagious. The fate of the Euro and indeed the fate of the EU economic alliance itself is under threat but of course there is another concern too. The old chestnut, inflation is at last beginning to show its ugly hand. In China it’s already at 5% and in UK 3% or thereabouts. Many observers predict the US to experience higher inflation later this year too and as inflation resurfaces one can expect a hike (or “spike”) in interest rates too. In UK the Governor of the Old Lady, Mr King has forewarned on a move up to around 5% by 2012, a 10 fold increase, so any sudden jolt could send equities and bonds into a spirral. It’s a very difficult landscape to predict at the moment, suffice to say that everyone would prefer lower taxes, more stimulae for private investors that might just lead to job creation, lower public spending (the ConDem Coalition seems to be going down this course but arguably the cuts are being ground down by unionism and stubborn behaviour) and a magic fix to the banking debacle and the deficits. Regrettably it’s not likely to happen but as market practitioners are well aware as long as the Fed, the ECB and the Old Lady stumble around in the dark rolling the printing presses then at least equities will remain buoyant. The disturbing scenario unfolding, however, suggests that a few other issues may catalyse the return to reality. 2011 will undoubtedly be volatile at times and with Brazil, Russia, India somewhere around 5-8% GDP growth and China running at 8-9% growth the onus may be on US to surprise us all on the upside. Even the perennial arch bear, Prof. Nouriel Roubini has conceded that the US could grow at up to 3% this year. Of course, the trouble with all these growth predictions and corporate profits (especially the banks profits) is that they pale into insignificance compared to the scale of sovereign and municipal debts and deficits. Something has to give here and although most investment specialists now subscribe to significant weightings in gold (5% to 75% is the range although 25-35% perhaps is more realistic) other precious and rare earth metals it’s likely that volatility (to the upside I guesstimate) may increase in this sub-sector. Most forecasters have targets of gold at $1,300-$1,800pto already whereas just a few earmark $2,300+ by 2012. The scarcity value here could well surprise a few politicians one day especially if tensions increase in Korea, Iran or in Pakistan. Interestingly the IMF completed a 403 tonnes auction throughout 2010 and the buyers were India, Sri Lanka, China, et al helping to underpin their currencies. With America’s interest bill estimated at $413bn for 2010 alone the consequencies are that rates must rise and related currencies depreciate. Sadly companies and individuals who have managed their finances prudently over the years could well end up paying for this mess through higher taxation. 

So what did happen in stock markets during 2010? The BP saga apart and Apple’s cementing of its position with the iPad markets tended to trade sideways until the final Q. Towards the end of the year much focus was directed at China and its control over 90% of the world’s rare earth metals sub-sector involving dozens of metals ending in “ –ium” which are essential to hybrid cars, cell phones and computer drives. The pendulum has swung and apart from Silicon Valley and a western specialisation in oil exploration and extraction it would appear that China is now dominant in most departments of the world economy.

In terms of stock selection I still continue to recommend the 2 oil majors, Royal Dutch Shell & BP (the recent problem with the Alaska pipeline can be fixed relatively easily) although I’d expect a small pull back to below £20 for RDS. There is unlikely to be any significant pull back on the oil price much below $80pbo (JPMorgan forecast $120pbo by end-2012 with a Brent average at $95pbo this year). Again I still await a buying opportunity in GlaxoSmithKline (below £12) and a host of other FTSE100 constituents which all appear to be ahead of themselves. Randgold (despite the election stalemate in Cote d’Ivoire) and African Barrick, however, still appeal at the current levels (£51 & 575p approx. respectively). Earnings could well surprise to the downside particularly in UK where consumers lower down are having a rough ride. Retail sales and 4Q growth was pretty static to say the least. In addition I continue to recommend Tullett Prebon now 416p yield 3.6% as the inter-broker-dealer should benefit from the volatility hereon. Amongst other miners on LSE I like Petropavlovsk (could be a takeover later this year), Anglo Pacific (a mining royalty play), the 2 canadians Yamana & Kirkland Lake, the smaller gold miners such as Chaarat, Mariana, Obtala, Orosur, Patagonia and Shanta, the tungsten play Ormonde Mining and amongst oils, Dominion (the Uganda situation appears more positive), Heritage (awaiting developments), Petroceltic (has been quiet of late but the hiring of ex-Tullow FD is bullish) and Soco Int’l (a takeover play on its Vietnam and Congo prospects). I’m hesitatingly awaiting a slowdown in China as I don’t believe its current growth can be maintained ( a 3-5% GDP rate is much more realistic) and if this happens then the knock on could be dramatic for the west as well as for emerging markets. Of course the focus should continue to be on natural resources (oil & gas), specialist metals (precious & rare earth), and moderately geared companies. Recently I have advocated more exposure in a few overseas investment trusts with decent yields although it should be stressed that only ½ units should be committed at this juncture with a proviso to add to on any pullbacks. They are the new trust, JPMorgan Global Emerging Markets Income Trust (prospective 4% yield), Henderson Far East (4%), Schroder Oriental (3.4%), BlackRock Latin America (1.2%) and I think the following also merit a look; BlackRock Brazil, JPMorgan India & JPMorgan Russia. The leader in the emerging markets pack, Mark Mobius’s Templeton Emerging appears to be pretty unwieldy these days and I’m not convinced by Anthony Bolton’s Fidelity China Fund either. 

Hold on to your helmets! A bumpy ride is forecast particularly in the Eurozone although judging by the state of bonds in the zone the EU may have its first ejection sooner than predicted. The inability of virtually every nation in EU to balance the budgets and keep to the guidelines set by the bureaucrats does not bode well.

Anyway England stormed the Ashes series down under and the Royal Wedding should at least be good for the merchandising industry (Portmeirion PMP should perform well). All we need now is some sunshine.

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