Double Dipping
Categories: Ethics/Morals, Regulations, Trading, Banking
Grab a chip and stick it in the queso. Take a bite. Then, using that same chip, you scoop a second helping of queso.
Gross. You might as well spit into the dip.
The financial version of double dipping is similar. Though less physically gross, it's more morally gross. The term applies to a broker manipulating the process of selling investment vehicles in order to receive additional (unearned) commissions.
Your financial advisor puts your money into a mutual fund that includes a commission for them. Then they put the fund into an account that generates a regular maintenance fee based on the amount of assets in the account. The broker received a commission when they purchased the fund for you. Then they get an ongoing commission from the fee-generating account. Double dipping.
In some (or many) cases, this is illegal. Brokers get around the issue by, um, disclosing to their clients what they're doing. Yep. Right there in black and white ink on page 437. Plain and easy to see.
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Finance a la Shmoop! What does it mean to have fiduciary obligation? Alright well
fiduciary refers to the responsible person, who has oversight, above a given
financial transaction, or process. That is, it is the fiduciary obligation, of the
head of a corporation's Audit Committee, to be certain that the
accounting process is handled fairly, objectively, inclusively and thoroughly [boss overseeing worker]
and there are a few other ly's in there, but well you get the gist. Doesn't it
seem strange, that some companies just seem to get into the same kind of
trouble again and again. Remember the BP oil spill, well it wasn't the first time
they'd had, an accident. You know, if you can call that spill only an accident.
What kind of oversight did they have? Any? Well some companies just have a [man carrying oil barrel
corporate culture that's run by the notion, that well, whatever isn't caught
as a crime, is legal. Lots of Wall Street stock brokerages came and went this
way. Yah, remember the Wolf of Wall Street? Kind of like that. Well what is
the obligation of a responsible party when faced with ethical dilemmas? Where
does the obligation start and stop? Should fiduciaries be held to a higher
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Weinstein effect there. Yes, No, maybe, alright. Right, all three times. [question ABCD chart]
It's definitely yes, no, or maybe.