Ask Rande

» RandeS - Jen,

Jen,

Don't want to get too hung up on potential stock fraud and manipulation on the net -- there are far more well-meaning investors than con artists. Would hate to see the message boards and chat rooms become a place of paranoia. At the same time, caution is in order. I read some recent estimates from the North American Securities Association (www.nasaa.org) that indicate investors are LOSING about $1 million an HOUR from stock fraud. So, it's a problem. Here's a couple more recent examples and hopefully that's 'nuff said.

A Florida-based website predicted ("pumped") that a company's stock would surge in price over an 18 month period and within 48 hours, fueled by this recommendation, jumped significantly. One problem -- the owner of the website and his associates also owned a significant interest in the company being recommended and quickly sold ("dumped") the stock for a profit of more than $500,000.

Another scheme involved 44 individuals pretending to be securities analysts when they were actually being paid by large stockholders of the companies that they recommended on their websites. The deputy director of the SEC's Division of Enforcement said, "the Internet makes it easier for would-be criminals to engage in securities fraud and "makes manipulations and fraud faster, cheaper, and easier for someone to perpetrate against unsuspecting members of the public."

-- posted by RandeS

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» Pete_Baker - Full Disclosure

Rande:

You have frequently written about the importance of full disclosure by financial advisors and commentators. You even went so far as to compliment William Fleckenstein for revealing his position in a silver mining company as he touts the bullish prospects for silver.

Why then can you not understand how some well-meaning individuals believe that Mr. Brinker was less than forthcoming when he touted UTEK on the Nightly Business report, on his radio program, and in his paid newsletter. He never did admit his own financial relationship to the company to his newsletter subscribers, nor did he admit his substantial investment in UTEK stock.

Leaving aside the performance of UTEK as an investment, please comment on the issue of full disclosure and Mr. Brinker’s relationship to UTEK.

Pete Baker

-- posted by Pete_Baker

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» RandeS - Pete,

Pete,

I'm fairly ignorant of BB's relationship with UTEK. I believe some have indicated he consulted to the company on their 401(k) plan. I'm not sure whether this is true, but if it is I guess I just don't see the problem. In the context of our discussion on internet stock fraud, full disclosure means letting people know if you have been paid to specifically promote a stock. In the context of general investment advice, full disclosure might mean disclosing form of compensation (eg, whether implementation of investment advice results in a direct commission to the person giving the advice or not -- potential "conflict of interest," etc.). Working for a company as an independent investment consultant to advise on retirement plan and/or provide participant education does not, in my mind, represent a conflict of interest. If anything, knowledge of the inner-workings of the company might be useful in making a recommendation. Perhaps the implication has been that BB recommended UTEK only because he wanted to get hired as a consultant to the company. Just my opinion, but I think such allegations are both unfair and ludicrous. Does anyone really think BB needs the work so badly he would recommend a stock to his followers that would otherwise be a bad investment decision? I don't get that one. Again, based on what I have heard, I don't believe the circumstances warranted any disclosure of any kind. Maybe someone knows something I don't, but in the absence of real facts I think it might be unfair to assume a conflict of interest.

-- posted by RandeS

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» RandeS - As to ownership of a stock that is being recommended -- I've se

As to ownership of a stock that is being recommended -- I've seen nothing to indicate BB has ever recommended a stock in order to drive up the price so he could bail out at a profit. Again, any such allegations, as far as I can tell, have to be based on personal opinion in the absence of hard fact (and might be considered slanderous). I have no problem with a reputable advisor owning a position in recommended securities/funds. In fact, I prefer it. Give me a fund manager who has his own money invested in the fund any day (even better when the manager's MOM is a shareholder). There are also securities laws that pertaining to investment advisors making recommendations that they themselves would otherwise not follow.

Look, I'm not in the business of defending BB -- he doesn't need me. If there was evidence he was anything less than honest and ethical I'd be the first to express outrage. As far as I can tell, however, the exact opposite has been the case -- in a profession where so-called "advisors" are more than willing to put their own interests above the customer's, BB is somewhat refreshing to say the least. Again, just my own personal opinion.

-- posted by RandeS

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» KirkL - Non Issue

I agree with Rande and I have confidence in Brinker that he is not trying to do anything to jeopardize his good name or newsletter subscribers. I believe he makes more on newsletter subscriptions then the CEO of UTEK is paid in annual salary (probably by a factor of I agree with Rande and I have confidence in Brinker that he is not trying to do anything to jeopardize his good name or newsletter subscribers. I believe he makes more on newsletter subscriptions then the CEO of UTEK is paid in annual salary (probably by a factor of ten, too....).

The very most BB can be accused of is having a blind eye to the shortcomings of some firms he is well familiar with. You can probably say the same for me about HWP and BOWG…8)

I have sure learned from BB's critics and try to let it be known where I might have a blind spot for firms I am familiar with…..

I still think BB is one of the most honest people in the business who also has the public eye....present company excepted, of course!

-- posted by KirkL

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» Thruhiker - I'm sick of this subject, but...

To avoid even the APPEARANCE of impropriety, Consumers Report does not accept advertising.

Why do you accept less than that from your financial advisor?

Rande, you have said before that the BB show is targeted to the relatively unsophisticated investor. Shouldn't these folks know that Montgomery is a sponsor of the show and BB was a consultant to UTEK before they invest in the funds or the stock?

Appears I'm in the minority here, but making financial recommendations without at the same time disclosing a previous or current financial relationship with these same companies is a serious ethical lapse from where I sit.

-- posted by Thruhiker

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» RandeS - thru,

thru,

Kind of sick of it too. As for Montgomery -- aren't the ads in and of themselves obvious testimony to the relationship. As to UTEK, it wouldn't be an issue if the stock wasn't a dog. Guess the lesson is to only recommend winners.

-- posted by RandeS

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» Pete_Baker - Montgomery

Come on Rande! What about the newsletter subscribers-- the paying customers? Should they be required to listen to advertisements on Mr. Brinker's radio show before deciding which of his recommended funds to buy? Be reasonable.

Pete Baker

-- posted by Pete_Baker

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» Hugs - Reason this...

Hey, thought this was the Ask Rande area.
Take that stuff back over to the BB thread if you want to pass morality judgement on Brinker.

Feel free to judge others anyway you want, but why require of others to judge as you do or to concur with your assesment? Don't you know that anyman convinced against his will is of the same opinion still? And... everyman is right in his own eyes.

Wonder if the polls would reveal that we had a country more concerned with financial morality than they are with spiritual, political, sexual, or any other kind you can think of? Shouldn't be too hard to predict that...isn't it written that the love of money is the root of all evil.

Back off, please.

Hu

-- posted by Hugs

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» matttheduck - conflicts of interest

of course, there are no ads in the newsletter, so that's hardly an issue. i'm with kirk on the likelihood that bb wants to jeopardize his newsletter income by shilling for montgomery, or anyone else, if their products are bad. exactly how naive are people? there wouldn't be a radio show without advertising. others may buy products or services because of celebrity endorsers, i'm not one of them. along with(apparently) a lot of people on this thread, i've lost money on utek. however, even if bb had included a statement about his "relationship" with the company, i still would have bought. his picks have been so good for so long i would have been crazy to do anything else. the only one i've failed to follow was the sell signal on the asian markets, which resulted in my getting killed on prasx. utek was a bad short-term call -- we'll see how it works out long-term. i'm still unclear on exactly what it is bb is or will gain from his "relationship" with this company, aside from his consulting fee. i guess if he had a bunch of $20 shares that he dumped after we all piled in and drove it up to $36, that would be troubling, but i doubt he did, and no one has made that accusation. i bet he's ridden it down with the rest of us.

-- posted by matttheduck

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