Word: levitts
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Beginning this week, you can call the new SEC hotline (1-800-SEC-0330) and get prerecorded answers to a variety of questions about stocks, bonds and mutual funds. But Levitt has more ambitious plans, starting with how to get the straight story out of your stockbroker...
...Levitt thinks the broker should answer a few questions on his own, such as, "Have you ever been censured or reprimanded or been a party to an arbitration settlement?" and "What's in it for you?" The broker may be getting commissions the client doesn't even know about: extra bonuses for selling the in-house mutual funds or free trips to Hawaii for selling the "product of the week." Did you realize, for instance, that a broker who switches firms is often rewarded with a double commission on whatever he buys and sells during his first few months...
...Levitt had his way, the commission system would be abolished altogether and all brokers put on salary so they could give the disinterested advice they're supposed to be giving. Short of that, he would settle for taking the gobbledygook out of mutual-fund literature...
...funded with fines and settlements paid by Wall Street firms that on occasion landed on the wrong side of the law: Prudential, Salomon Brothers and the old Drexel Burnham Lambert. Getting hoodwinkers to bankroll a program to train investors to avoid being hoodwinked has a nice symmetry to it. Levitt, meanwhile, is taking consumer education to the national level. The sec has recently published a useful pamphlet, Invest Wisely, that demystifies the mutual fund, but Levitt's real goal is to get the mutual funds to demystify themselves...
...show how a prospectus can be improved, Levitt took a typically dense paragraph, shown here, and asked Warren Buffett -- America's most successful stock picker -- to translate it into simple English. Suddenly, the fog lifted...