SRO shorthand stirs up acrimony

What’s in an acronym? Plenty, it turns out. Things started innocently enough following the merger of…

What’s in an acronym?
Plenty, it turns out.
Things started innocently enough following the merger of the regulatory arms of Washington-based NASD and the New York Stock Exchange.
Needing a new moniker, the groups came up with the Securities Industry Regulatory Authority, or SIRA. But “sira,” it seems, is the Arabic term used for the various traditional Muslim biographies of Muhammad, the prophet and founder of Islam.
Not wanting to offend, the new Washington-based group decided to call itself the Financial Industry Regulatory Authority, or Finra.
That didn’t sit well with the Denver-based Financial Planning Association. The full name, said FPA spokesman Brad White, could “inadvertently lead to consumer confusion” by implying that the new self-regulator had jurisdiction over investment advisers and financial planners, who, in fact, are regulated by the Securities and Exchange Commission.
“We’re not demanding a name change, but we think they ought to withdraw it,” Mr. White said.
That seems unlikely.
“I would need a degree in psychology to comment on the level of paranoia in [the FPA’s] press release,” said NASD spokesman Howard Schloss.

Political switcheroo
Republicans had to be shaking their heads last week following a fund-raiser for Democratic presidential contender Sen. Hillary Clinton, D.-N.Y., at Morgan Stanley’s New York headquarters.
Host John Mack, the company’s chief executive, who backed President Bush in 2004, invited senior staff members to the bash, where the minimum donation to get in the door was $1,000, though Mr. Mack urged those attending to give the maximum $4,600 allowed by law.
The event was “purely voluntary,” Mr. Mack wrote in an e-mail, while adding that he felt that it was important for senior staff members to be involved in the political process, according to the Financial Times.
“I have always looked beyond party labels to the person who I felt was best for the job and most able to lead the country forward,” he wrote. “I personally believe that person is Hillary Clinton.”
Mr. Mack also helped organize a fund-raising dinner in New York for her last month featuring another of her prominent supporters, billionaire investor Warren E. Buffett.

Settling up
With UBS AG primed to boost its wealth management business in the United States (see story, Page 1), the Zurich, Switzerland-based bank’s U.S. brokerage unit last week decided to settle a lingering lawsuit brought by New York state.
UBS Financial Services Inc. of New York agreed to reimburse about 3,000 customers $21.3 million and pay a $2 million penalty for placing clients into fee-based accounts as part of its InsightOne program.
New York Attorney General Andrew Cuomo said in a statement that the firm inappropriately steered its brokerage customers into the fee-based accounts.
The settlement “was a warning to the entire industry that the customer’s interest must come first,” he charged.
Taking issue with Mr. Cuomo’s statement, UBS contended that the InsightOne program provided clients with a choice of payment plans and didn’t “inappropriately steer customers into unsuitable accounts or switch them regardless of whether the accounts fit their needs.”

More Merrill moola
Propelled by overseas growth and strong performance in its investment banking, brokerage and bond-trading businesses, Merrill Lynch & Co. Inc. last week reported a 31% rise in profits.
The roaring bull’s net income rose to $2.14 billion for the second quarter, up from $1.63 billion for the comparable period last year.
Chief executive E. Stanley O’Neal said the company’s second-quarter results reflected its push for “revenue diversification.”
What’s more, Merrill appears to have weathered the fallout in the subprime-loan market, at least so far. The company’s total exposure to subprime loans was “limited, contained and appropriately marked,” according to chief financial officer Jeffrey Edwards.