Insider trading is not a new concept, but it continues to be a high priority for the SEC’s enforcement program because it undermines investor confidence in the fairness and integrity of the securities markets.
Individuals are getting more creative in looking for ways to cover their tracks. In 2014 the industry has seen everything from someone attempting to hide insider trades by using a relative’s account in a foreign country, to a man writing tips on post-it notes that he then literally ate to eliminate the evidence. Meanwhile the SEC is leveraging more technology tools than ever before to strategically detect illegal trading activity.
Put simply, insider trading is buying or selling securities while in possession of material, nonpublic information about the security. Insider trading in this context is illegal – you can’t profit from information that is not available to the whole market. It is also illegal to communicate (or “tip”) material, nonpublic information to others who may trade in securities on the basis of that information. All information is considered nonpublic unless it has been effectively disclosed to the public. Material information includes anything that an investor might consider important in deciding whether to buy, sell, or hold securities. For example: new product development, earnings reports, mergers & acquisitions, major personnel changes, obtaining or losing important contracts, litigation, or a big scandal.
Just an investigation, even without subsequent litigation, can be very costly both financially and personally. Penalties for insider trading vary depending on the severity of the crime, but generally include disgorgement (forced giving up of illegal profits) plus interest, civil fines of $1 million or three times the profit gained or loss avoided through the trade (whichever value is greater), criminal penalties up to $5 million, bar from serving as an officer or director of a public company, and imprisonment for up to 25 years.
You should never trade while aware of material, nonpublic information. If you receive a tip: don’t place any trades; don’t share the information with anyone; and tell the person who gave you the tip that it is insider information that he/she should not be sharing with anyone.
The days of printing and mailing hard copy contracts are quickly moving into the past as more and more companies are using electronic signatures. Having to address and stamp an envelope in order to mail a signed contract will eventually become a distant memory. Merriman is excited to partner with DocuSign to allow our clients to submit paperwork online. DocuSign was founded in Seattle in 2006, and now has nearly 1000 employees spread world-wide. Merriman is using DocuSign for client contracts and our custodians, Charles Schwab, TD Ameritrade and Fidelity, are using DocuSign for most account applications (excluding forms that need to be notarized).
Signing a document electronically is safe, secure and legally binding. We know account paperwork contains personal information so protecting your data is top priority. DocuSign utilizes encryption standards, retention and storage practices, and data security to ensure documents can only be accessed, read and executed by designated users. This means only you and those you authorize have access to your documents. Your content stays confidential, including from DocuSign—employees never have access to your content.
Here are some more great benefits:
- Whether you’re in an office, at home, on the go, or even on vacation across the globe – as long as you have internet access, you can sign documents electronically.
- Joint account holders or trustees can each sign documents without having to be in the same location or mail copies back and forth.
- Increased accuracy – it’s impossible to miss a required field so you’ll never have a document returned to you to redo.
- Open accounts and transfer funds faster since there is no time spent waiting for mail delivery.
- It’s easy to maintain electronic copies of all your signed documents, and you can always print a hard copy if you wish.
Seattle is still reeling with excitement from the Seahawks winning the Super Bowl! Over 700,000 Seattleites celebrated downtown to welcome the champs coming home. No matter where your team allegiance lies, it’s easy to spot the strengths of the Seahawks both on and off the field. These lessons can be applied to multiple areas of life, including your finances.
Here are 12 things everyone can learn from the Seahawks:
1) It’s never too late: Russell Wilson was a third round draft pick but that didn’t determine his performance. No matter when you start saving and investing, there is always opportunity ahead of you.
2) Diversification is key: Every player on a team has a specific job to do, just as every investment in your portfolio has a unique purpose. It’s hard to win with a team full of quarterbacks! Design your portfolio with broad diversification to cover all types of positions.
3) Defense wins championships: There is a saying that “offense wins games and defense wins championships.” Many times it’s the team’s offense that gets all the praise and glory, but without a strong defense to hold back the competition, all of the points scored are for nothing. It’s easy to get caught up in short term performance chasing of stocks, but make sure to manage downside risk with bonds so that your returns won’t disappear in a down market.
4) Find a coach: Every team needs a coach to lead them to victory. Having a financial advisor will keep you on track toward achieving your goals.
5) Don’t compare your strategy to others: Every team has a different approach on how to win games. Your friends and family have their own ideas about investment that may be different from yours, and that’s okay. Stick with the plan you make with your financial advisor – it is unique to you.
6) Break expectations: Seahawks fullback Derrek Coleman is deaf. No one expected him to be able to play in the NFL but he didn’t let other people’s beliefs hold him back. Commit to success and don’t let others get in the way of what you want to accomplish.
7) Take a look back: Teams spend countless hours watching game footage to learn from their mistakes. Look back at historical investments to learn all you can about performance volatility throughout various market conditions.
8) Go all in: The Seahawks have an “All In” sign that they hit on their way to a workout. Often we don’t want to commit to a plan unless we know for sure it will work out…but a plan can’t work unless you commit. Go all in.
9) Never give up: Even when it looks like a team has lost, there is always a chance for a comeback late in the game. Sometimes when a portfolio is down, we are tempted to switch strategies or abandon hope. If you give up too early, you might miss the winning finish.
10) Have fun: Football is tough work but it is also a lot of fun. Always make time for the activities you enjoy with the people you love. As we say here at Merriman – Invest Wisely, Live Fully.
11) Give back: In the midst of practice, games, media interviews, and sponsor appearances, Russell Wilson still makes time to visit the patients at Seattle Children’s Hospital. Appreciate the gifts you have in your life and share them with others.
12) Identify your 12s: Seattle’s fans are known as the 12th man. Even though the fans aren’t on the field, they play an important role in the game. Find fans who will support you through all your wins and losses, and recognize their contribution to your success.
Another year flew by and the holidays are already here. Snowflakes are falling, houses are decorated, and families are reunited! In the midst of all the joy, it’s easy to put your finances aside. However, if you will be over 70.5 years old by the end of the year, we want to remind you that it’s time to take a Required Minimum Distribution (RMD) from your IRA or retirement account. An RMD is designed to ensure that you withdraw at least a portion of the funds in your account over your lifetime – and that you pay taxes on those funds. Taking your RMD is important because the stakes are high! Failure to withdraw the required minimum will result in a hefty penalty: The amount that was not withdrawn is taxed at 50%. In other words, if the RMD on your traditional IRA is $8,000 in 2013, but you only withdraw $3,000 during 2013, you will be subject to an excise tax of $2,500 (50% of the amount by which the RMD exceeds your actual distribution). It’s quick and easy to arrange your RMD by calling your financial advisor. We recommend you do so by December 15th to ensure plenty of time for the distribution to occur before the end of the year. The sooner you get it done, the more time (and money!) you will have to spend with the ones you love.
Emergencies and disasters can happen anytime, anywhere, and often without warning. Last year, Hurricane Sandy caused significant and wide-ranging damage, which led to the closure of the equities and options markets on October 29 to 30, 2012. As a fiduciary, Merriman has a responsibility to protect our clients’ interests from risks resulting from the inability to provide advisory services due to a disruption in business, such as a natural disaster. A Business Continuity Plan (BCP) provides guidance regarding the steps and actions that should be taken in the event of an unanticipated interruption of normal business operations.
Here are the top five ways a BCP helps to minimize the effects of emergencies and disasters:
- Reduce downtime. Every hour business is down is time we miss helping our clients. Having a BCP helps us get back up and running more quickly. In the meantime, since Merriman is not a custodian, our clients are also able to call Schwab and Fidelity directly if we are ever temporarily unavailable.
- Ensure important business operations continue. Some of our day-to-day work is flexible and can be done at any time, but other tasks are time sensitive and cannot be delayed. A BCP helps identify mission-critical staff and processes.
- Allow for remote operation. If we are unable to get to our building (for example, due to a large snow storm), employees can work from a remote location via remote desktop connection. We also have a virtual phone system so that if the phone lines in the building are down, all incoming calls can be routed to employee cell phones and/or home phones. In addition, this year we switched our email to Office 365, which is cloud-based – meaning our email is accessible from any location as long as there is an Internet connection.
- Protect important information. Merriman keeps electronic copies of important documents so that information is not lost in the event of a fire. We also back up our data so we have redundancies in place in case a server goes down.
- Take care of everyone in the office. We have an emergency food and water supply that is restocked annually in case we are forced to stay in the building for a period of time.
It’s not enough just to have a plan; we also need to make sure it works! Every year Merriman conducts BCP testing using simulated disasters to ensure we are prepared for a variety of crisis situations. We take what we learn from our testing and update the plan as needed.
If you are interested in reading more, the SEC, CFTC and FINRA jointly released this advisory alert that addresses the importance of implementing and testing a Business Continuity Plan.
It seems like every year thieves become more creative in finding new ways to steal. A disturbing new trend is directly targeting financial advisors and their clients. Financial institutions are seeing a noticeable increase in attempts at fraudulent wire transfers by email “spoofing,” where an email request appears to be sent from the client, but is actually from a fake-but-similar email account (or sometimes it’s the client’s actual account).
Think, for a minute, about the emails you have sent to your advisor. If your email account was hacked, the hacker would have access to all of those emails in your sent folder. They could easily send an email (from “you”!) to your advisor requesting a fund transfer to a third-party bank account, along with convincingly forged letters of authorization. If you’ve ever emailed a scanned copy of something you’ve signed, they have access to your signature too. Often, by the time someone realizes the request is fraudulent, it is often too late. The money is already gone, the transfer cannot be unwound, and the wire fraud theft is complete.
It is our policy to never accept instructions like this via e-mail, but in response to this increased risk, we have trained our employees to identify warning signs of electronic wire fraud attempts. We have also reviewed and improved our procedures to verify a wire transfer request is legitimate before acting on it, particularly in scenarios where the transfer is going to a third party.
However, it’s important to take steps to make sure your information is secure and avoid the possibility of this type of fraud altogether. We use www.box.com to securely share files with our clients and keep that sensitive information out of your inbox.
Just to be safe, here are some tips on how you can help protect your email accounts from being hacked:
- Make sure to use secure complex passwords. We recommend choosing a password with a minimum of 8 characters, including upper & lower case letters, numbers and symbols.
- Don’t use the same passwords on multiple accounts. If you get hacked in one, they have access to everything.
- Use double authentication if possible. This requires you to enter an extra code when logging in from an unrecognized IP address. Click here to learn more about Google’s 2-step verification.
- If you get email on your smart phone, make sure the phone is password protected.
- Beware of storing documents in your email that contain your signature, social security number, or other non-public personal identifying information. If your account gets hacked, the thief will have everything they need to steal your identity.
- Don’t ignore signs that your email account has been hacked, like finding emails you didn’t send in your ‘sent’ folder, or hearing from your friends that they’ve received spam from your email address.
- If you do get hacked, be sure to change your passwords immediately! Also call your financial institutions to make sure your accounts have not been compromised.