By: Matthew Arndt, CFA, CPA, CFP | July 10, 2009 | Conflicts of Interest, Deceptive Sales Practices, Illegal Schemes & Scams
Ameriprise’s agreement to pay $17.3 million to settle charges that it received millions of dollars in undisclosed “incentive” payments to sell certain REITs to its brokerage customers is an example of how potent enticements like large sales commissions can lead to deplorable acts that harm investors. Ameriprise received about $30.8 million in payments related to its sales of REITs and failed to disclose the payments. Is it really a surprise to anyone ethical lapses would occur with such a lopsided relationship fraught with conflicts of interests?
Any situation in which an individual or corporation is in a position to exploit investors in some way for their personal benefit should be viewed with great skepticism. What incentive would a broker receiving large sales commissions have to ensure he is looking out for the best interests of his clients? Sure there are FINRA suitability requirements but these are vague at best. They do not require the broker to act in the best interest of the investor; only to make sure the investment is “suitable” for the client. Whatever that means?
This latest ethical lapse at Ameriprise should be a major cause for concern. Why would any investor stay with a firm that overlooks and tolerates these sorts of unethical practices?
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