Some LICENSE TO STEAL mini-reviews...
"As an avowedly frank, no-holds-barred expose, Licensed to Steal lays bare the shocking truth that Wall Street has kept secret these many years: namely, that brokers lie, hype stock they don't know anything about, and churn, park, front-run and spin IPOs. They cheat."
"This is a great book!"
"It's the book your stockbroker doesn't want you to read...brokers routinely manipulate share prices, hawk dubious investments, pocket kickbacks, make unauthorized trades and generally treat their clients' money as if it were their own. In the midst of this mighty bull market, the authors proclaim a simple truth: A broker is never your friend."
"There is nothing like the inside account to show how things really work."
WALL STREET JOURNAL
"A must read for every investor."
"The book's message is extremely relevant."
Keep reading for full reviews from...
WALL STREET JOURNAL, MOTLEY FOOL, ABCNEWS.COM, THESTREET.COM, INSTITUTIONAL INVESTOR, KIRKUS REVIEWS, PUBLISHERS WEEKLY, LIBRARY JOURNAL, AMAZON.COM, RIDGEWOOD NEWS
WALL STREET JOURNAL
Acting in the Client's
Interest? What a Joke.
By Stanley W. Angrist
For all the close-up portraits of American business, and for all the academic studies of capitalism's intricate dynamics, there is nothing like the insider account to give a picture of how things really work.
According to "License to Steal," (HarperBusiness, 277 pages, $26) a first-person expose written by an anonymous stock broker (with the aid of Timothy Harper, a financial journalist), the folks on Wall Street figure what clients don't know won't hurt them. And there is plenty that clients don't know.
The author chronicles his career -- from cold caller and trainee at what he euphemistically calls the "Harvard of financial institutions" to full-fledged, licensed broker. He starts officially at a scruffy company specializing in microcap initial public offerings and ends up as a senior vice president at a sparkling new boutique firm.
The book details the techniques brokers use to skin their clients. One of the author's firms, for instance, made up research reports, which brokers would then use to sway customers into buying a particular stock. The author shows himself confidently pitching stocks he knows very little about. Unhappy clients suffering recent losses are subjected to hokum about the firm's "long-term strategy" for their accounts, when in fact, as the author confesses, "the only strategy was to get more money out of them." A hugely successful broker at one of the author's firms "refused to let clients sell out their positions to cover margin calls." Rather, he would extract more money from them, supposedly to avoid "guaranteeing" a loss.
Sometimes, as the authors note, a brokerage firm is a "market maker" in a particular stock it is trying to sell. Such a firm, acting as a principal, buys, say, 1,000 shares from its inventory at $11.75 and immediately sells the lot to a client at $12.25 a share. According to the accounting scheme at one of the author's firms, the client would pay $12,250 plus the usual 3% commission, for a total of $12,617.50. Since the stock cost only $11,750, the broker pocketed an extra $500 in commission.
There is nothing illegal about this sequence, but the inside-bonus aspect of it can certainly influence the stocks that brokers recommend to their clients. At one firm discussed in the book, brokers were penalized for selling stocks not held in the firm's inventory. To be sure, reputable brokerage firms operate differently: They indicate on their confirmation slips that they are market makers and that they have sold stock out of inventory. They also forgo their usual commission.
One of the most telling quotations in the book comes from a seasoned broker, who told his trainees: "Remember, when they send in that money, it's not theirs anymore. It's ours. It's ours to make money with. We're never giving it back to them." And what about the high-minded principle of serving the client's interests? "Control the money," the author is sternly advised. "Control the client."
License to Steal: A Must-Read for Every Investor
By Yi-Hsin Chang (TMF Puck)
Only 11 more shopping days 'til Christmas. Have I got a stocking stuffer for you. Check out License to Steal: The Secret World of Wall Street Brokers and the Systematic Plundering of the American Investor. It might be a little big for some stockings, but it's a fast-paced narrative about the real deal behind the brokerage industry.
The book is by "Anonymous" and journalist Timothy Harper. It traces the Street "education" of the anonymous co-author's rise from lowly cold caller to successful stock broker. As the first few sentences of the book tell us:
"This is a cautionary tale of Wall Street. In a sense, it's the book your stockbroker doesn't want you to read. It's a walk down the dark side of Wall Street, the true story of brokers who broke the law and violated their professional ethics. Beyond the outright crooks, however, it is also a lesson in how brokers routinely mislead their clients and abuse their trust."
Essentially, License to Steal is extremely Foolish and carries some of the same ideas The Motley Fool has been trying to spread to the populace for quite some time now -- hidden commissions, bogus stock recommendations, and the inherent conflict of interest within the brokerage industry (brokers make money not by making you money but by getting you to buy and sell as much as possible).
I've never recommended a book without reading it from cover to cover, but I feel completely comfortable suggesting this one after reading about a third of it (I'm in the middle of finals!) because every page I have read is entertaining, well-written, and enlightening.
The book recounts the outrageous lifestyle of some rogue brokers but also gives many everyday instances of how brokers shamelessly peddle stocks they know nothing about, "park" shares in clients' accounts without their knowledge, and manipulate a stock price to create a bigger spread (difference between the bid and the ask and hence bigger profits).
License to Steal can be an eye-opening experience for investors still unaware of the pitfalls of using a traditional, full-priced broker. At the same time, it is an interesting story even for more jaded investors wanting to know the nitty-gritty details of the unscrupulous practices of all too many stockbrokers.
If you're concerned that the book is by 'Anonymous" (the most prolific author in human history, by the way), fret not. Tim Harper, the journalist who helped the real-life stockbroker write this book, explains in a note on Amazon.com that he shares those misgivings. This was no ploy to boost sales. Actually, the fact that the co-author is anonymous has hurt sales. In fact, "Anonymous" was originally supposed to use his real name but changed his mind just before the book came out. If you read the book, you'll see that the book couldn't have been written had the names been left in.
Of the seven customer reviews currently featured on Amazon, six are overwhelmingly positive, while one is distinctly negative, but it's written by a broker! To me, that's all the more reason to read the book.
So if you buy one book this holiday season, buy License to Steal -- it'll forever change the way you view stockbrokers and the brokerage industry.
A Broker Spills the Beans
Tantalizing Tales From the Brokerage Industry
By Roland Jones
If there was ever a compelling argument for keeping your money under the mattress, this might be it.
License to Steal: The Secret World of Wall Street Brokers and the Systematic Plundering of the American Investor tells the inside story of Wall Street’s full-service brokerages, where stockbrokers are alleged to routinely trick, cheat and defraud their customers just to line their own pockets.
Investors are portrayed as victims; their investments nothing more than capital to make more commissions for money-greedy brokers.
Playing the Spread
Shocking stuff, to be sure. And the book, co-written by an anonymous former Wall Street broker and journalist Timothy Harper, lays out the tale to maximum effect.
A first-person account of a one former broker’s career, the book follows him from his early efforts as a cold-caller and trainee broker at “the Harvard of financial institutions” to his days selling shares in IPOs worth millions of dollars at a second-rate brokerage.
Along the way, the authors don’t forget to include details of the murky inner workings of the brokerage industry.
In this whistleblower’s tale, brokers are shown using questionable, and sometimes illegal tactics to maximize their income at the expense of their clients.
At one point, the book’s greenhorn broker is introduced to the art of hidden commissions.
It works like this: A broker contacts a client and recommends that the client purchases a stock trading at “around 10.” The client agrees to buy 500 shares. He expects to pay $5,000, plus the broker’s 3 percent commission, making a total of $5,150.
But the broker has other ideas. The recommended stock is actually trading at $9.75 by $10, making for a spread of a quarter. The broker buys the stock from the market at $9.75, and then sells it to the client at $10.
The client pays $5,150, but the stock actually cost just $4,875. The client is denied the better price and the broker pockets $275, which includes a hidden commission of $125.
“Figure that hidden commission many times over, many times a day, on trades large or small, and it’s easy to see how brokers can play the spread to boost their incomes,” write the authors.
Bait for the Bulls
The book’s message is extremely relevant, especially given that more Americans than ever before are investing their hard-earned dollars in the burgeoning bull market, the longest in U.S. history.
Equity ownership among Americans is on the rise. Nearly half of all households invest in equities — a total of 78.7 million individuals as of early 1999, up 85.6 percent from 42.4 million in 1983 — according to a study by the Securities Industry Association, a trade group for the securities industry.
Most investors hand over their money to stockbrokers, who buy and sell stocks and bonds on their behalf. But most Americans know little or nothing about how the nation’s brokerages work, and they continue to entrust their money to brokers who they believe will aim to make them as much money as possible.
In truth, write the authors, most brokers are only concerned with selling and reselling the stocks in a client’s portfolio in search of more commissions for their sales — an inherent conflict of interest.
“Remember, when they send in that money, it’s not theirs anymore,” a senior broker tells the rookie broker in the book, in a scene worthy of Oliver Stone’s movie Wall Street. “It’s ours. It’s ours to make money with. We’re never giving it back to them.”
But the book is not without its flaws. The anonymity is one problem. Naming names is “less important than telling what these stockbrokers did and saw, and how they and other stockbrokers routinely abused their relationships with clients,” write the authors.
Indeed, while anonymity gives the authors more freedom, especially in the case of the co-author, who is described as a senior vice president and broker on Wall Street, it also leaves the reader with lingering questions about his or her credibility.
Another obstacle is a rather one-sided view of the industry, focusing on a small hard-core of cold-calling firms and boiler rooms that tout stocks to vulnerable investors. The book has little relevance to the many regional brokerages nationwide that maintain good long-term relationships with clients and encourage long-term investing.
Like the story of Gordon Gekko, the Michael Douglas character who liked to boast that “greed is good,” License to Steal makes a compelling read, but sometimes comes off more like a Hollywood movie than a serious study of U.S. brokerages.
By David S. Ortiz
“It’s the book your stockbroker doesn’t want you to read.” That’s how Anonymous,a young but world-weary broker, and his co-author, journalist Timothy Harper, trumpet their
new book, License to Steal: The Secret World of Wall Street Brokers and the Sysematic Plundering of the American Inyestor. Harper and Anonymous, who calls himself Rob Burtelsohn
in the narrative, describe a world in which brokers routinely manipulate share prices, hawk dubious investments, pocket kickbacks, make unauthorized trades and generally treat their clients’ money as though it were their own. In the midst of this mighty bull market, the authors proclaim a simple truth: A broker is never your friend.
When they send in that money, it’s not theirs anymore,” says a broker known as the Bald Shadow. “It’s ours. It’s ours to make money with, We’re never giving it back to them.” No person or firm in License to Steal is identified by a real name. That is not surprising,perhaps, but it does dull the impact of this insider’s cautionary tale. Among the cast of characters who populate this world are the Maniac, the New Issue Whore, the Queen of the Cold Callers. The prestigious, old-line brokerage house where Burtelsohn starts his career as a cold caller is known as Harvard, Junior College is the smaller firm that skates just this side of the law, then
there’s Prep School, the Maniac’s start- up, which Burtelsohn nearly joins. Many of its employees end up in prison.
Burtelsohn is a quick study, and he moves fast. “If a guy had been at Harvard more than six months, he was probably a loser,” he boasts. “But I might still pick his brain a little.” Within four months he earns his broker’s license and becomes a qualifier (one level below broker). Harvard won’t promote him fast enough, though, so Burtelsohn goes Junior College. There the flashy,unscrupulous Lazlo, a midlevel broker, takes him out for a night on the town that includes two female strippers and some expensive rolls of the dice at underground casino. By the end of the night, Lazio owes $21,000.“It’s only oney@” he says. “I’ll get it back tomorrow, from clients.”
To raise the cash, Lazio “parks” 50,000 shares of an obscure stock in the accounts of someunsuspecting clients, generating $80,000 in commisions (his aftertax share will be $20,000), despite the fact chat none the accounts is discretionary. The broker covers his cracks by bribing the mailroom clerk so confirmation notices for these unauthorized trades never reach his clients.
At Junior College, Burrtelsohn takes part his first IPO: an issue for SmallTech, a company that makes handheld computer operating systems. He is allocated 20,000 shares – a pittance compared to the allotments given to his more senior colleagues. Burtelsohn is confident he can move all 20,000 shares on the day of the IPO. At the 22-cents-a-share flat-fee “concession” the firm pays the broker, he figures he’ll net $4,400 for the day. The deal proves to be much move lucrative
than that. The stock, issued at 10, climbs to 12 ˝ the first day and to 14 the second day. Burtelsohn ends up selling not single shares as such but “units,” each of which consists of two shares of common and four warrants. Altogether Burtelsohn’s concession, 5 percent commision and additional fees that amount to hidden commissions from the bid-asked spread enable him to pocket more than $20,000 in
just 48 hours. “I regarded those two days as my first a broker,” Burtelsohn relates. “I counted on a lot more days like those.”
But Burtelsohn soon discovers that brokers, too, get taken. Shortly after his Small- Tech victory, Burtelsohn is tricked by a customer, the New Issue Whore, who buys $5,000 of an IPO, then makes Burtelsohn sell her out two days later for a quick $8,500 profit. Burtelsohn must sell at the listed price and can therefore can exploit no hidden commission from any spread.
The author regrets pushing stocks just to make commissions: “I felt like I had used my clients,
though many of those clients were eager to make the kind of investments I offered, and some of them did very well off those investments.” In the end, though, Burtelsohn decides to stay in the securities business – at a wire house branch office in the Northeast suburbs.
To be sure, a lot of brokers – maybe most brokers -- spend their days putting clients into Cisco Systems, not Small-Tech. And these days most brokerage firms reward asset gathering, not stock churning. But the hard sell remains ever present. In any sales transaction, the Romans had it right:
David S. Ortiz is a Copy Editor with Institutional Investor.
The anonymous stockbroker author and journalist Harper (Moscow Madness, 1999) create fictional ``Brett Burtelsohn'' to trace an archetypical career in unnamed Wall Street IPO bucket shops where investors regularly feed the hands of those that bite them. From the hell of cold calling, young Brett observes brokers active in churning accounts, swapping trades with colleagues, parking shares in dormant accounts, using nominees to hide self-dealing, and following other illegal practices (all of which are clearly outlined).
``When they send in that money, it's not theirs any more,'' he is taught. ``It's ours.'' He soon passes his Series 7 (the brokers' qualifying exam) and secures his own license to steal. Beguiled by the heady lan of the princes of finance, Brett, a born salesman, is single-minded in his pursuit of cash and the life only a lot of cash can buy. In his mendacious line of work, our hero pushes and prevaricates, spins hokum and talks bunkum, forcing worthless new issues on trusting customers. Is it the company Brett kept? Did he fall in with a bad crowd? Readers should realize that, despite some inherent conflict of interest between investors and their brokers, not every broker is an egregious crook. At every firm, from small boutiques to major wire houses, brokers have valuable franchises in the form of their books (as they call their account lists). They can't maintain that asset by mulcting their clients. Even Brett ultimately sees the light. Now he's a small-town stockbroker, coaching kids' soccer, golfing with clients, becoming (heaven help us) a certified financial planner. This cautionary yarn, vividly told, has a badge of verisimilitude. There are, indeed, many lads like Brett prowling the Street and many frenetic boiler rooms like those in which he worked. The story is true enough to make naive investors madder and maybe wiser. The rule ``know your customer'' becomes ``screw your customer in this engaging slice of brokerage noir.
In an act of whistle-blowing bound to garner attention on Wall Street and among the increasing numbers of Americans who invest in the stock market, Harper and Anonymous expose the stockbroker’s bag of dirty tricks. Their bean-spilling account is written in the first person, although the publisher states that Anonymous is a composite of several brokers. The result is a book that reads like a juicy tell-all with the always nagging caveat that readers never know who, exactly, is telling them all. The narrative tracks Anonymous’s career from his days as a cold caller to his working selling shares in IPOs worth millions of dollars to his departure from Wall Street for a less stressful job at a suburban brokerage. Along the way, Harper and his sources catalogue questionable, sometimes illegal, tactics and make the case that such dodges are used by most brokers and that brokers want to maximize their income at the expense of their clients. Readers will breeze through the book, but they will finish it with as many questions about Anonymous as about brokers: throughout his short, seedy career, Anonymous sought advice from sleazebags and operators from whom any sensible young professional world have kept a sane distance. The book’s bottom line – “the securities business is a basic conflict of interest; the best strategy for clients is to get into good investments and keep them long-term, but brokerage houses make money by moving clients in and out of positions to generate commissions” – is true enough but far from the whole truth.
Harper, a lawyer who teaches at the Columbia University School of Journalism, teams up with several Wall Street stockbrokers to break the financial industry's code of silence. They create the fictional character Brett Burtelsohn to tell the story of how rogue stockbrokers (and their firms) bilk investors by pitching overvalued initial public offerings (IPOs), charge bogus commissions, and manipulate and mislead clientele. In a few short years, he rises from being a cold caller to vice president – a rise made possible by his enthusiastic engagement in activities that, while not against the law, are certainly not in his clients' best interests. Very detailed descriptions of transactions and sales tactics bring home the meaning of the phrase caveat emptor. A well-written, easy-to-follow, suspenseful, and thought-provoking read for any investor; recommended for public and academic libraries.
What would you do if one day you received a quarterly statement from your brokerage, showing that you'd purchased stock you didn't know you owned, and sold stock you still thought you had? You'd chew out your broker, sure; you might even fire him. But would you ever, in a million years, guess that the broker had deliberately mangled your account in order to generate commissions so he could pay off gambling debts to gangsters? That happens in the first chapter of License to Steal, the sort of book that will keep spooked investors up reading all night as surely as would a Stephen King novel. Together Timothy Harper, a journalist and lawyer, and Anonymous, a former senior Wall Street vice president and broker, have created a composite character called Brett Burtelsohn, and the book takes us on his adventures in the brokerage business.
The authors swear that every incident they recount in the book actually happened, even though names of people and companies have been changed. Sure, it would've been a more sensational book if the authors had gotten all this on the record, if we knew the name of the broker who used his clients to keep from getting his legs broken. But naming names isn't the point. What they want to do is show the fundamental conflict of interest that occurs between a broker and his clients: Clients only make money, in all likelihood, if they buy good stocks and hold onto them for a long time. But the broker makes money only if his clients frequently buy and sell. Like any salesman, a broker really sells himself to clients. He earns their trust, and in return recommends financial moves that are in their best interest--he urges them to buy the stocks he makes the most money selling, and discourages them from buying others. Just about every chapter contains a shock of some sort. The lesson for investors reading this book is that your broker is a natural salesman, a high-roller. He wants to live a good life, and is awfully good at convincing people like you to pay for it. --Lou Schuler
The longest bull market in hisdtory has given rise to unprecedented levels of investment by the general public and unprecedented greed within the brokerage industry, say the opening lines of License to Steal.
An account of Wall Street in the ’90s is a shocking parade of swindles, broken faith, cheated, clients, gambling, drugs, and a culture whose bottom line is personal profit, not the needs of its clients.
Anonymous and Timothy Harper pierce the financial industry’s code of silence for the first time. In a gripping narrative, they show how successful brokers on the “StreetWithout Shame” peddle worthless stocks and IPOs, generate bogus commissions, and raid clients’ accounts for their own use.
They use a fictional young stockbroker to show his start as a cold caller, his rise as a young operator staying just this side of illegality and how he told his seamier colleagues to stop this side of the law, and how they ignored him and wound up in jail.
It is a wild and woolly story of the greatest bull market of the century, and a handful of rogue brokers and their everyday deceptions that have become routine in the securities business.
License to Steal (HarperBusiness) is a warning to millions of American investors who trust and rely on stockbrokers to guide them in their investments.
Timothy Harper, a journalist and lawyer, is a member of the adjunct faculty at Columbia University and serves as writing coach and editorial consultant for several major corporations. He is the author of eight other books.
License to Steal reveals how and why the quest for easy money has enriched stockbrokers beyond their wildest dreams. It is a tale of arrogance and hubris, of renegades driven by greed and self-interest, unethical and often ilegal.
The book tears open the green veil that has long shrouded the inner workings of brokerages. Those eager to reap riches in today’s market will be shocked by the world revealed by the authors.
This is a cautionary tale of Wall Street, in a sense. It’s a book your stockbroker doesn’t want you to read.
It’s a walk down the dark side of Wall Street, the true story of brokers who broke the law and violated their professional ethics and is a lesson in how brokers routinely mislead their clients.