Photo: Scott Mullin / For Hearst Connecticut Media
STAMFORD — The speakers who led the meeting Thursday night at the Marriott hotel agreed on a way to strengthen financial markets without the need for any new legislation or spending: more investor education.
At the investor forum hosted by the nonprofit Financial Industry Regulatory Authority, U.S. Rep. Jim Himes, the FINRA head, and the state Banking Department’s director of securities all underlined their belief in investors doing extensive research and thinking critically to reduce risks with their financial allocations.
“Within the government — whether it’s the state government or federal government — we can help the regulators, we can do regulation well hopefully, we can balance regulation, we can give the SEC and FINRA the resources they need to go after the bad guys,” Himes, a member of the House Financial Services Committee and a former Goldman Sachs banker, told an audience of 430. “But there is no substitute in healthy markets for educated investors.”
Himes, a Democrat who has represented Fairfield County’s Fourth Congressional District since 2009, also cited a proposal he has sponsored, the Senior Safe Act. Backed by FINRA, the bill would allow financial institutions and professionals to reach out to government agencies if they have concerns about senior citizens being financially exploited.
“Sadly, a lot of exploitation, a lot of the predatory behavior is aimed at our senior citizens, who quite frequently, through diligence and care and prudence, have amassed retirement funds, and they are looking forward to decades partly relying on those funds,” Himes said. “It is in that moment sadly that people are exploited or taken advantage of. And the Senior Safe Act should help with that.”
Lynn McKenna-Krumins, the state Department of Banking’s director of securities, also highlighted the importance of investor education. It offers the best protection against fraud, especially since recouping swindled funds is often impossible, she said.
“If it sounds too fear to be true, it is too good to be true,” she said. “Your greatest ally is a healthy dose of skepticism.”
FINRA plays a crucial regulatory role. Based in Washington, D.C., the nonprofit is authorized by Congress to protect investors by ensuring the broker-dealer industry operates fairly and honestly.
The challenges for regulators and investors have grown as technological advances have produced a proliferation of investing options, said FINRA President and CEO Robert Cook.
“Just because it’s automated, don’t give up your skepticism; treat it like you would though you’re dealing with a person face to face,” Cook said. “Make sure you get the same types of questions answered, as you would if someone were trying to sell you a product over the phone or in person.”
Cook and Christine Kieffer, senior director of the FINRA Investor Education Foundation, suggested caution in investing in cryptocurrencies such as bitcoin.
“Virtual currency markets are highly speculative,” Kieffer said. “The Securities and Exchange Commission and the Commodities Futures Trading Commission — they’re looking closely at virtual currencies themselves and also products associated with them. But it still really remains unclear if and how these products will be regulated and by whom.”
In the forum’s closing section, McKenna-Krumins and Hearst Connecticut Media personal-finance columnist Julie Jason held an audience Q&A. The questions included a query about whether investors could negotiate mutual fund fees.
“The fact of the matter is all this information is in the prospectus, and you can look up exactly what share classes are charging,” Jason said. “FINRA has a wonderful resource that allows you to check and compare different share classes and different funds. So that’s the route to go. Negotiation is not part of the deal.”
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