When Does Financial Support Become a Kickback). There are five bulleted questions at the end of the 1 answer below »
Consider the case of what is referred to as “soft money” within the securitiesindustry. According to critics, a common practice in the securities industry amountsto little more than institutionalized kickbacks. “Soft money” payments occur whenfinancial advisors receive payments from a brokerage firm to pay for researchand analyst services that, in theory, should be used to benefit the clients of thoseadvisors. Such payments can benefit clients if the advisor uses them to improvethe advice offered to the client. Conflicts of interest can arise when the money isused for the personal benefit of the advisor. In 1998, the Securities and ExchangeCommission released a report that showed extensive abuse of soft money.Examples included payments used for office rent and equipment, personal traveland vacations, memberships at private clubs, and automobile expenses. If youlearned that your financial advisor received such benefits from a brokerage, couldyou continue to trust the financial advisor’s integrity or professional judgment?What facts do you need to know to better judge this situation?What values are at stake in this situation? Who gets harmed if a financial advisoraccepts payments from a brokerage? What are the consequences?For whom does a financial advisor work? To whom does she have a professionalduty? What are the sources of these obligations?Does accepting these soft money payments violate any individual’s rights?What would be the consequence if this practice were allowed and becamecommonplace?Can you think of any public policies that might prevent such situations? Is thisa matter for legal solutions and punishments
