Brian Smiley interviewed on CNNfn by Ali Velshi.
Ali Velshi, CNNfn anchor, Business Unusual: The good old days, your stockbroker’s number was kept on speed dial and every stock you bought went through the roof. But now, trusting your investment is like trusting the weather and even when the forecast calls for sunshine, you still bring an umbrella.Joining me now to tell us how you can get, you can avoid getting sucked into a bad investment is Brian Smiley, partner at Page Gard, Smiley and Bishop, a law firm that represents investors defrauded in investments and brokerage transactions. Brian, thanks very much for being with us.
BRIAN SMILEY – Thank you.
VELSHI: Let’s talk about how investors deal (19:17:30) with some of the stuff that we’ve seen in the last year. You know, corporate misconduct that actually affects the everyday investor.
SMILEY: I think the lesson of the last year has (19:17:40) been to be very, very skeptical as an investor. Unfortunately, you have to be skeptical of the companies you’re investing in and the legitimacy of their books and (19:17:50) their accountants (19:18:00) and you also have to be skeptical of the people at (19:18:10) brokerage firms who are recommending that you buy these particular stocks. The New York attorney general’s investigation was very distressing. There is (19:18:20) a wholesale betrayal of trust of the ordinary investor.
VELSHI: What’s the investor to make of all the stuff, the rush to (19:18:30) act on behalf of the investor whether it’s from (19:18:40) Congress or the New (19:18:50) York attorney general or the Securities and Exchange Commission. Nobody seemed to be clamoring to get up to the plate a year ago. We had to hear about these things in (19:19:00) the news to find out that people are actually getting conned. It’s not just people losing money on the markets because markets go up and down.
SMILEY: Right. a couple of (19:19:10) years ago the model that we all heard about, the paradigm out there was the high-tech company that was beset with plaintiff’s lawyers because the stock went (19:19:20) down 5 percent and suddenly they were swarming with class actions and Congress was concerned about how to hold back the tide of litigation against these companies. There’s been a (19:19:30) complete shift as we have now learned that a lot of these companies and a lot of the investment banking firms and brokers who were recommending (19:19:40) them were in cahoots and were simply not telling the truth to the American public and to the American investor. The bubble burst and now people want to know why.
VELSHI: Let’s talk (19:19:50) about the analysts. You referred to that a couple (19:20:00) Times and just this week in fact, we saw the government putting analysts scams at the top of their list of scams (19:20:10) that people have to watch out for. We didn’t really sort of see them as con jobs but when you look deeper into it, some of these analysts’ recommendations (19:20:20) were con jobs. How does the investor deal with that? How do you look for advice and information about the stocks you want to buy and make sure you’re not (19:20:30) getting conned?
SMILEY: That’s the tough call these days. The first thing is be very (19:20:40) skeptical of conflicts of interest. If you have a brokerage firm that is recommending a stock to you on (19:20:50) the basis of what their analyst says, take a look and find out if that brokerage firm does investment banking for the company whose stock is being (19:21:00) recommended. If they do, there is a very large investment banking hand that’s feeding the brokerage. Investment banking revenue is huge to brokerages. In some instances it’s higher than commissions and the loyalty (19:21:10) tends to go there. I’m not saying disregard anything a brokerage firm has to say through their research department just because they do investment banking with a firm, but (19:21:20) I am saying what you should do is not make it, their analyst (19:21:30) your only source of information.
VELSHI: Brian, in this new world, post August 14th and post the Sarbanes Oxley Act and post new SEC regulations and (19:21:40) the attorney general from New York’s settlement with Merrill Lynch, do you think (19:21:50) both companies and analysts are going to be more careful about making sure that the information they put (19:22:00) out is accurate?
SMILEY: I think we will see more fine print disclosure. I don’t know that there’s going to be an attack of integrity in the business. You just have to realize (19:22:10) that as long as brokerage firms are making in the billions of dollars on investment banking end of their business, doing (19:22:20) underwritings, private placements, et cetera for companies, there’s always going (19:22:30) to be a temptation, at least not to say bad things through their research analyst about these companies.
VELSHI: Brian, thanks for joining us. Good to talk to you.
SMILEY: Thank you for having me.
By Ali Velshi and Brian Smiley