Pillars

Author:  Michael Babad And Cathrine Mulroney

dscf0022What sorts of conflicts of interest result when brokerage firms get too close to their clients? Hmm...let's find out, shall we? 

Some companies issue stock in order to raise money for acquisitions. Some of it could also be used for paying back debts it owed to the firm that helped it raise that money. It's also interesting when a full service securities dealer underwrites stock and is also in the business of selling stock to its clients. A former senior executive of a major dealer had an interesting view on this. "The only reason why you had a retail clientele was to sell new issues to them. We're creating all this new merchandise. We have to be able to distribute it. Otherwise the guy who's the borrower isn't going to use us." CHAPTER 4: HONEST BROKERS/ PG 83. Some dealers won't publish negative reports on companies, even if the reports are accurate and truthful. Some firms have fired employees for asking questions that could compromise profits.   Canadian Banks became more powerful in the 1960s thanks to Walter Gordon, the liberal finance minister. When New York's Chase Manhattan Bank attempted a takeover of the Toronto Dominion Bank, a ten percent limit was put in place to prevent foreign interests from acquiring a controlling stake in Canada's largest financial institutions. Without serious competition, Canada's banks grew organically and eventually swallowed up all their competitors. The Canadian banks are oligopolies and generate hundreds of millions of dollars a year in fee based income. Why is the interest rate on some credit cards 16.75 percent compared to the prime rate of just 6 percent? Call up your local bank and find out.

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