I strongly oppose any further regulations by FINRA of leveraged or "complex" securities, especially any potential minimum liquid net worth requirements. Such regulation would be devastating for me personally and would represent a grave injustice perpetrated against many people.
There's a proper role in society for a truly private, voluntary organization that helps investors understand finance, rates brokers and warns investors about unscrupulous brokers. But FINRA is officially sanctioned by the SEC and broker membership is mandatory to trade securities in the United States. FINRA regulations are thus backed by the force of government and can be considered an extension of government coercion. FINRA regulations are coercive regulations, not ones that companies voluntarily submit themselves to.
So why would a minimum liquid net worth requirement for buying leveraged securities be an injustice? Because it would be a punishment of innocent people for the wrongdoing of others. It deprives rational, responsible people of freedom for the sake of protecting the irrational and irresponsible from the consequences of their own actions. A person like me, who knows the nature and risks of leveraged equities and judges that they are the best vehicle for my plans, should not be shackled and have my plans destroyed because someone else might be irresponsible and get into such financial instruments without knowing what he is buying. That is injustice.
If a broker defrauds investors by lying to them about certain securities, then that should be legally punished. Fraud violates a person's right to informed consent in business dealings and so is effectively a form of coercion. But the government and its thinly veiled agents have no business punishing brokers and investors when no fraud or other coercion has occurred.
If by requiring a certain liquid net worth for certain transactions, FINRA thinks it's protecting the vulnerable from their own mistakes, I will tell you that this is not a desirable effect. "Vulnerable" here means "vulnerable to errors," which means "irresponsible," because any responsible person will do proper research, invest in proportion to their liquid net worth and won't risk losing money they absolutely can't afford to lose. So, once again, the idea here is to protect the irresponsible from the consequences of their own irresponsibility, at the expense of the responsible. In doing this, you don't encourage the irresponsible to be more responsible, you merely hide the bad effects from them in this one case, reducing their ability to judge the natural effects of their actions. Your coercion makes their judgment--and the good judgment of the responsible--irrelevant to their life in this case. You thus destroy an incentive for people to be responsible.
Or do you think that everyone with a liquid net worth under say, $1,000,000, is inherently too irresponsible or too stupid to properly deal with advanced finance and leveraged equities? Such contempt for the poor and middle-class is quite unwarranted. We are able to be responsible and to understand complex financial instruments, just as the rich can.
If you treat ordinary adults like little children who need "daddy government" to protect them from the big, bad (honest) brokers and their scary products, you will produce a society of scared masses begging for a dictator to tell them what to do. That's how you get horrors similar to what we saw in the Twentieth Century.
For the Public
FINRA DATA
FINRA Data provides non-commercial use of data, specifically the ability to save data views and create and manage a Bond Watchlist.
For Industry Professionals
FINPRO
Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks.
For Member Firms
FINRA GATEWAY
Firm compliance professionals can access filings and requests, run reports and submit support tickets.
For Case Participants
DR PORTAL
Arbitration and mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution Portal.
Need Help? | Check System Status
Log In to other FINRA systems
Eric M Comment On Regulatory Notice 22-08
I strongly oppose any further regulations by FINRA of leveraged or "complex" securities, especially any potential minimum liquid net worth requirements. Such regulation would be devastating for me personally and would represent a grave injustice perpetrated against many people.
There's a proper role in society for a truly private, voluntary organization that helps investors understand finance, rates brokers and warns investors about unscrupulous brokers. But FINRA is officially sanctioned by the SEC and broker membership is mandatory to trade securities in the United States. FINRA regulations are thus backed by the force of government and can be considered an extension of government coercion. FINRA regulations are coercive regulations, not ones that companies voluntarily submit themselves to.
So why would a minimum liquid net worth requirement for buying leveraged securities be an injustice? Because it would be a punishment of innocent people for the wrongdoing of others. It deprives rational, responsible people of freedom for the sake of protecting the irrational and irresponsible from the consequences of their own actions. A person like me, who knows the nature and risks of leveraged equities and judges that they are the best vehicle for my plans, should not be shackled and have my plans destroyed because someone else might be irresponsible and get into such financial instruments without knowing what he is buying. That is injustice.
If a broker defrauds investors by lying to them about certain securities, then that should be legally punished. Fraud violates a person's right to informed consent in business dealings and so is effectively a form of coercion. But the government and its thinly veiled agents have no business punishing brokers and investors when no fraud or other coercion has occurred.
If by requiring a certain liquid net worth for certain transactions, FINRA thinks it's protecting the vulnerable from their own mistakes, I will tell you that this is not a desirable effect. "Vulnerable" here means "vulnerable to errors," which means "irresponsible," because any responsible person will do proper research, invest in proportion to their liquid net worth and won't risk losing money they absolutely can't afford to lose. So, once again, the idea here is to protect the irresponsible from the consequences of their own irresponsibility, at the expense of the responsible. In doing this, you don't encourage the irresponsible to be more responsible, you merely hide the bad effects from them in this one case, reducing their ability to judge the natural effects of their actions. Your coercion makes their judgment--and the good judgment of the responsible--irrelevant to their life in this case. You thus destroy an incentive for people to be responsible.
Or do you think that everyone with a liquid net worth under say, $1,000,000, is inherently too irresponsible or too stupid to properly deal with advanced finance and leveraged equities? Such contempt for the poor and middle-class is quite unwarranted. We are able to be responsible and to understand complex financial instruments, just as the rich can.
If you treat ordinary adults like little children who need "daddy government" to protect them from the big, bad (honest) brokers and their scary products, you will produce a society of scared masses begging for a dictator to tell them what to do. That's how you get horrors similar to what we saw in the Twentieth Century.