SEC Views on Investment Advisor Behavior

The SEC has published it's views regarding Investment Advisors.

I find these guidelines particularly interesting.

People do not often think of Investment Advisors as moral creatures.

I have summarized the guidelines below with more easily understood terms.

An Investment Advisor must be Independent, Shrewd, Suitable and Loyal :

Independent:

An investment advisor has to stand on his own two feet. His recommendations may not be that of another advisor or a news article unless he discloses to the client the source of that recommendation. The Investment Advisor ought to be progenitor of the investment ideas delivered.

Shrewd:

The Investment Advisor must buy at the lowest price and sell at the highest price to take advantage of optimal execution on behalf of his clients. Sadly most Investment Advisors do not have an independent and formal program for establishing what it means to execute orders shrewdly.

Suitable:

The advice must be suitable to the life goals and personal values of the client.

Loyal:

Although they typically do not, I feel Investment Advisors should sign loyalty oaths to their clients. In a field where there is limitless information and mixed messages, endless sales pitches and seemingly contradictions one fact must remain, the Advisor must remain loyal to the client. Specifically, it is the Advisors job to exhaust his personal energies discovering and presenting the most essential, up to date and prescient financial information to his client. This information distilling function is what empowers both the Investment Advisor and the client. Through the lens of that essential information the client is made able to act in accordance with his or her values and goals in a world that might otherwise obfuscate the context in which clients make financial decisions. For me loyalty is not just about a feeling. The degree of Advisor Loyalty may be measured by the depth of the information gathering process employed by that Advisor.

My past life in day trading

I have left www.dcgfinancial.com on the internet as an example of a way of thinking, and a part of day trading history.

The trading team at the now non-existent Solid Gold Financial and I developed this information gathering platform for the purpose of making informed 24 hour trades in the Currency market.

I traded my own money using this methodology and the results from this short real life experiment are linked below:

Day one:

http://www.dcgfinancial.com/FirstTrade.htm

Months later an opportunity arises:

http://www.dcgfinancial.com/July24Statement.htm

http://www.dcgfinancial.com/4minute.htm

http://www.dcgfinancial.com/DetailedStatement.htm

Then we caught wind that the regulations regarding small broker dealers would soon change.

Needless to say most of us closed our accounts and sought greener pastures.

The discrepancies between business practices in Forex and Finance are immense.

I will not detail them here but those of you who are interested in discussing the regulatory nuances of the two fields with someone who has experience in both please call me.

Forex has been a bad experience for the vast majority of participants. I hope I can educate people on why this is the case and alternatives.

I thought you ought to know that.

-David Caro-Greene