The dishonest use of honest tools which I develop, is a concern of one of my most talented, integrity focused, and important to me of advisors. He is concerned that those intent on profiting from taking advantage of investors will reflect badly on me.
Following is a review of how those of questionable integrity cold possibly use some of the tools which I have had a role in creating.
As the writer of a daily advisory message to the more than 1,000 stockbrokers in the many branch offices of the firm which first hired me on my USMC discharge, I described factually that which the firm’s analysts knew about stocks which were heavily traded the prior day. Those advising investors, directly or through their advisors, can have an undisclosed interest in the stocks being recommended. I believe that a failure to disclose any interest held in that being recommended would be dishonest.
As the provider of a service graphically presenting data regarding more than 300 quoted stocks relative to the same factors of the DJIA, I relied on publicly available data as reported by the companies. It is theoretically possible for advisors to knowingly use incorrect data, and this would be dishonest.
As the provider of a service presenting the investment performance data of hundreds of mutual funds, we accepted and ranked, without preference, the performance and other facts reported by the funds. It is possible for advisors to change and present data incorrectly to influence investors. This would be dishonest.
As the founder and CEO of 2 NYSE member firms specializing in serving institutional investors, we frequently acted as a principal by taking the risk of buying or selling blocks of securities, to serve the needs of our client’s trading disk. It is possible that some of our block trading competitors took positions in the stock ahead of the client order, to benefit from the change in price caused by the trade. This would be dishonest.
As an advisor to both investors and business founders in the purchase and structuring of revenue royalties, it was necessary to base decisions on projected revenues and other company factors. Although very few companies, especially early-stage companies, can accurately predict their future results, there should be good reasons to believe the company’s projections are achievable. To induce company or investor action, if the projected results are believed to be overly optimistic would be dishonest.
As an entrepreneur, I have developed a concept for a firm to act as a broker for investors wishing to bet on the relative performance of securities. The concept addresses the concerns of unexpected loss and does not involve any securities transactions. It is possible that some entities may take unfair and illegal advantage of investors using the excitement of betting. This would be dishonest.
I do not believe that making money requires taking advantage of people or doing dishonest things. I cannot control the actions of others who use tools for other than the reason they were created. Hammers and kitchen knives were not designed to be used as weapons in fits of rage, but it happens.
Arthur Lipper, Chairman arthurlipper@gmail.com
British Far East Holdings Ltd.