Oppenheimer has the highest percentage of advisers who have been disciplined for misconduct.

There are more wolves on Wall Street than you might realize.

In a paper published last month, academics Mark Egan, Gregor Matvos and Amit Seru, looked at conduct records for financial advisers.

They point out that while a number of highly-publicized scandals (think “Wolf of Wall Street”) have rocked the industry, the full scale of misconduct has not been “systematically documented.”

Their study, they argue, is the “the first large-scale study that documents the economy-wide extent of misconduct among financial advisers and financial advisory firms.”

The findings are pretty damning. Misconduct is surprisingly common, and there are a number of repeat offenders out there moving from firm to firm.

The academics crunched the data on 1.2 million current and former advisers in the period from 2005 to 2015, and found that 7.28% have been disciplined for misconduct and/or fraud. That is equivalent to around 87,000 people.

Here are some key stats:

• The most common cause of a misconduct disclosure is a customer dispute that has been settled.
• The three most common reasons for customer disputes are unsuitable advice, misrepresentations and unauthorized activity.
• In some counties in Florida and California, around 20% of advisers have been disciplined.
• Roughly one third of the 7% disciplined are repeat offenders.
• Past offenders are five times more likely to engage in misconduct than the average adviser.
• The median settlement payment paid to customers is $40,000.
• Over half of financial advisers who engage in misconduct keep their job in to the following year.
• And 44%, of those who do lose their job after misconduct find a new job with a year.
• Morgan Stanley and Goldman Sachs have the lowest percentage of advisers who have been disciplined for misconduct, while Oppenheimer has the highest.

Here is an excerpt from the paper:Academic paper

Bloomberg View’s Matt Levine drew my attention to the study. Read his post on it here:

Carl Icahn’s Warning On Stock Market

Carl Icahn

Icahn, along with a handful of others, has been saying that we’re in a bubble and the government is not helping the situation.

He started by explaining why Donald Trump had become so popular in the presidential polls. It boils down to a frustrated American public, angered by how little reform has been passed to stimulate growth. Two key issues Icahn argues must be addressed are the carried-interest tax loophole for investors and the exorbitant repatriation tax that discourages multinational companies from bringing their profits back to the US.

For the financial markets and the economy, Icahn says the core problem is the Federal Reserve and its ultra-easy, zero-interest-rate policy. While Icahn credits the Fed with getting us out of the most recent crisis by using these policy tools, he also argues that it was the Fed that got us into that crisis to begin with.

Icahn observed that while low rates are intended to boost business investment, in reality they have actually led corporate managers to employ financial engineering and accounting shenanigans to boost earnings per share.

Icahn offers a very straightforward and chilling summary of what he believes to be an unsustainable and fragile set of circumstances that are propping up the stock market. And in the end we’re left wondering whether we could repeat what we saw during the financial crisis. Or worse.

Below is a summary of Icahn’s warning about the stock market.

The irony of low interest rates is that they helped create the earnings mirage.

Carl Icahn

“What they’re doing with the money is almost perverse,” Icahn said.

Rather than using cheap financing to invest in business and equipment, Icahn observed, companies are engaging in financial engineering to boost earnings and ultimately their stock prices.

The earnings we hear about are very suspect because they exclude a lot of things.

Carl Icahn

Instead of investing for growth, companies will just use money to buy other companies to create the perception of growing earnings.

Carl Icahn

Icahn says it’s like taking steroids. Everyone’s happy to see an athlete jump high. But that type of earnings growth is not sustainable.

Carl Icahn

“I know this stuff. I’ve taken over companies. I understand the way of it.”

Carl Icahn

These earnings that cherry-pick what’s accounted for are fallacious.

Carl Icahn

Furthermore, a lot of companies that shouldn’t be buying back stock are buying back stock.

Carl Icahn

“A buyback is a short-term fix. But it weakens the balance sheet.”

Carl Icahn

Now, companies like Apple can and should buy back stock because they’re sitting on hundreds of billions of dollars in cash and not a lot of debt.

Carl Icahn

It’s a problem when companies with little earnings and lots of debt buy back stock. And yet everyone looks at earnings go up quarter-to-quarter and your stock goes jumping up.

Carl Icahn

Encouraged by the stock going up, managers just keep buying back more and more stock.

Carl Icahn

And yet, earnings aren’t really growing.

Carl Icahn

What will happen in that market, and who will buy your stocks when those earnings are coming down?

Carl Icahn

Who will do that even at a time when rates are already low?

Carl Icahn

Low rates have been inflating asset bubbles everywhere.

Carl Icahn

The Fed’s balance sheet has mushroomed. This is money that has flooded the markets and crowded out the investor class.

Carl Icahn

Because of the Fed, investors have nowhere to go except for riskier markets. Like stocks …

Carl Icahn

… “and even more concerning, the high-yield-bond market.”

Carl Icahn

All of this money in the risky high-yield-bond market has helped fuel a boom in mergers and acquisitions.

Carl Icahn

Ultimately, what’s the price of low interest rates?

Carl Icahn

Last time around, we had a global financial crisis.

Carl Icahn

What about this time?

Carl Icahn

Soros Exits Positions in Apple, Wal-Mart, Intel

 

 

JOSH BECKERMAN

George Soros

Bloomberg News

Soros Fund Management exited its stakes in Apple Inc.AAPL +0.59%, Wal-Mart Stores WMT +0.17% and IntelCorp.INTC +1.09% during the fourth quarter.

While the firm sold its holdings in Exxon Mobil Corp.XOM -0.34%, it was active in the energy sector, disclosing new positions in Devon Energy Corp.DVN +0.27% and Transocean Ltd.RIGN.VX -4.09%

Soros increased its General Motors Co.GM -1.01% position by 728,938 shares to 4.9 million, also adding to its Herbalife Ltd.HLF +5.52% position.

The firm, which disclosed a Yahoo Inc. position in the third quarter, sold 3.2 million of its 5.1 million shares in the latest period. Yahoo reported last month that its fourth-quarter earnings excluding items declined. On Friday, David Einhorn’s Greenlight Capital Inc. disclosed a new stake in Yahoo.

In other changes involving tech companies, Soros sold off its Google Inc. and Microsoft Corp. holdings.

Other new Soros positions include Yum Brands Inc., Salix Pharmaceuticals Inc., LyondellBasell Industries NV and American Realty Capital Properties Inc., the real-estate investment trust whose stock price suffered following an October disclosure that the company overstated a measure of income in the first quarter of 2014.

The fund, which invests for George Soros and his family, disclosed in 2011 it would return cash to outside investors.

Investors who manage more than $100 million are required to disclose most securities holdings within a month and a half of the end of a quarter. The filings give the public a relatively fresh look at the portfolios of well-known investors.

Buffett’s Berkshire Exits Exxon; Reveals New Stake in Deere

Bloomberg News

• ANUPREETA DAS

Warren Buffett’s Berkshire Hathaway Inc. sold off nearly $4 billion worth of shares in Exxon Mobil Corp. during the fourth quarter, a move likely spurred by the collapse in oil prices that have hurt profits at energy companies including Exxon.

Berkshire sold about 41 million shares of Exxon, having initially bought the stock in the third quarter of 2013 and adding to it slightly in later quarters. The position made Berkshire one of Exxon’s largest shareholders. Exxon, the biggest U.S. oil company, said earlier this month it was looking for ways to cut costs as profit fell during the fourth quarter.

Berkshire also sold off a small position in ConocoPhillips and cut its stake in National Oilwell Varco Inc., an oil and gas drilling equipment maker, by about 18%. The disclosures were made Tuesday in a regulatory filing required of investors who manage more than $100 million.

Berkshire also revealed a new $1.5 billion stake in farm-equipment maker Deere & Co. The position was built up beginning in the third quarter of 2014. The stock was likely picked by Berkshire Chairman and CEO Mr. Buffett, who has said that the smaller stock picks in the firm’s portfolio are likely those of his two investment managers, Todd Combs and Ted Weschler, while the larger positions are his.

The two managers collectively oversee about $18 billion of Berkshire’s stock portfolio, which stood at $109 billion in the fourth quarter.

As in recent quarters, the Omaha, Neb.-based conglomerate continued to add to its portfolio of media-company holdings. It bought $182 million worth of shares in 21st Century Fox. The company was formed in 2013 after splitting from News Corp., which owns publishing assets including The Wall Street Journal.

Berkshire also revealed it owned more than $1 billion worth of shares of cable operator Charter Communications Inc. Among its other media stocks are DirecTV, Graham Holdings Co., Liberty Global PLC and Media General Inc.

During the quarter Berkshire added to its stake in International Business Machines Corp., one of Mr. Buffett’s “Big Four” holdings. The conglomerate bought about 6.5 million additional shares of IBM; its entire stake of 77 million shares was valued at $12.4 billion as of Dec. 31. Berkshire maintained its stakes in the other three companies in this group – American Express, Wells Fargo and Coca Cola Co.