Are Financial Firms Undercapitalized?

Based on the latest financial news, including the fact that Merrill Lynch just had their worst write down ever in their history, even the SEC has questions about their alleged financial reporting:

SEC scrutinises disclosures made by Merrill Lynch

The essence of the investigation is really about the firm's disclosures about its financial position and whether they were honest and forthcoming about that, to its employees, customers, investors, and to the government.

Obviously, something is amiss with our current business climate, and the way our financial firms have betrayed our trust.

A further example of Financial Firms misleading the public includes Peregrine Financial Group, an alleged leading firm in the Futures and Commodities Industry. They were fined and found to be operating without sufficient capitalization funds and failing to notify the Commodity Futures Commission, aka the "CFTC!"

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that it has issued an order instituting and simultaneously settling an administrative proceeding against Peregrine Financial Group, Inc. (Peregrine) of Chicago, Illinois. The action results from an audit by the CFTC's Division of Trading and Markets of Peregrine's financial statements as of March 26, 1999. In consenting to the order, Peregrine neither admitted nor denied the findings in the order.

Specifically, the CFTC order finds that Peregrine, a registered futures commission merchant, was under capitalized as of March 26, 1999, in violation of section 4f(b) of the Commodity Exchange Act (CEA) and CFTC regulation 1.17(a). The order also finds that Peregrine violated CFTC regulations by: 1) failing to file timely notice with the Commission that its adjusted net capital was less than the minimum required, on March 26, 1999; 2) failing to file notice that its adjusted net capital was below the early warning threshold; 3) failing to keep accurate books and records; and 4) filing with the Commission an inaccurate capital computation and statement of financial condition on its Form 1-FR-FCM as of March 26, 1999. These violations of the CEA and the CFTC's regulations occurred primarily because Peregrine improperly classified certain receivables as "current assets," according to the order.

How long will it take for us to realize that we are being taken advantage of by these large Wall Street and Chicago Financial firms? They have betrayed and continue to betray our collective trust.

On many levels.

Let's face it, they are in business for themselves; not for us. Recommending what or how much to allegedly "invest" in is inherently a conflict of interest.

They always make a commission or a fee; and we take all of the risk.

Isn't it time that the consumer take the power back from the big Financial Firms