Bears Teeing It Up Again

by StockJockey

Thursday, March 06, 2008 - 1:48 pm

The good old days on Wall Street sure seem like an eternity ago. The SEC finally closed the books on the midget tossers in Boston; now all we are left with are memories:

"The broker selection process on Fidelity's equity trading desk was compromised when gifts and lavish entertainment swayed the flow of brokerage business," said Walter Ricciardi, Deputy Director of the SEC's Division of Enforcement. "This misconduct created a serious risk of investor harm and violated Fidelity's duty of allegiance and loyalty to investors."

"Investment advisers must insist that brokerage firms compete for mutual fund business based on their ability to deliver best execution, not based on personal considerations like event tickets." SEC.gov

It is outrageous that Fidelity was able to attend the Ryder Cup on the SellSide's dime; they only offered me the U.S. Open at Pinehurst, but I did get to see Payne Stewart's swan song. Fidelity took full advantage of their power, but the rules circa 1997 were a bit gray, and everybody was doing it, after all.

Working on Wall Street is certainly not as fun as it used to be. There is a bull market on, but only for margin clerks. The action today is leaving me rather speechless, and we will wait to see what the final hour brings. Hopefully Charlie Gasparino takes the rest of the day off.

And if you need to know, Peter Lynch's handicap must be near 30. If you think buying stocks in this market is painful just try teeing off behind him on Sankaty Head. The last year has made a lot of people look foolish, and now even Peter Lynch is being called a hacker. If you are trying to play the game long today, all I can say is:

Fore!

Fidelity’s order flow was up for grabs:

Indeed, some of the emails between traders and brokers reflect a shared perception that the job of a so-called “sell side” broker includes the provision of travel and tickets, and that one advantage of being a so-called “buy side” trader is the opportunity to receive such benefits. For example:

In May 2003, Pascucci asked a broker, “Who will be the first guy on sell side to offer Green Monster seats?” The broker replied, “Me”

During the period of Quinn’s employment at Jefferies (Sept ‘02 to Oct ‘04) they received over $60 million in commissions from Fidelity’s client accounts. The firm went from ranked 42nd among the firms used by Fidelity to 10th.

In February 2003, Smith commented to a Fidelity trader about “the obvious pattern of loading up a broker, then disappearing on a golf trip, etc. It used to be Red Sox tickets and a dinner, now it’s private jets to the Masters.”

In September 2003 Bruderman forwarded to brokers and email that parodied a beer company’s advertising campaign:

Here’s to you Mr. Institutional Sales Trader. Because you spend all day lying to people with MBA’s from Ivy League Schools, even though you failed Econ 101 at the Community College. And if the stock goes up or down, you don’t care-as long you get your nickel (per share commission). Five cents a share! So crack open an ice cold Bud Light you overpaid sack of shit, because without you there would be a lot of buy side guys sitting in bad seats at the concert.

A few bad apples ruined it for everyone that followed. The commissions would have ended up somewhere, and the traders tried to justify it based on this notion.

You can barely grab a drink after work any longer without getting it approved in advance. You can’t make this stuff up, the stories are true, and Bruderman was the biggest whore on the Street.