Assassination through Legislation
Letters are crafted as arrows. The bullets are the culmination of my chapter. The title of my story is your trap. The intention is pure, but the result is destructive.
Lack of “Creative Free Market Capitalism” over the years has eroded the US Market. Creating rigid frame works to tell people what they can and cannot do starts with great intentions. As the only reason for their inception is to prevent a subsequent catastrophe.
Unfortunately the end result is typically an erosion of competition, inspiration, and creativity. Allowing creation in markets is what first created a stock market, a private offering, an option or a derivative.
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As generations age and pass on the new participants fall into pre-set systems. Often these pre-designed systems teach individuals to shun innovation (i.e. you can only do it this way). This creates frameworks where people are challenged less. The absence of learning creates fear when these same individuals encounter anything unconventional. If these same individuals wield power fear-based decisions can become prevalent.
Failure to understand what a person is doing can spur instant sanction, closure, or preventative actions to prevent the possibility of a bad result.
Often the latter (prevention) acts as a self-fulfilling prophecy. Anytime the lead innovator is pulled from their post prior to the completion of their process the removal of this key person will inevitably cause failure, money loss and in some cases bankruptcy.
MY PERSONAL EXPERIENCE
Ironically, a premature protective action from an agency destroys the wealth of those they seek to protect.
Such was the case with me when I was forced out of several companies positions due to conflict of interest and allegations of violating the investment advisor act.
My regulating agency (the “SEC”) verbally informed me I could no longer hold a series 65 license while simultaneously being an entrepreneur who sought to raise money from investors to fulfill their entrepreneurial goals. I had to choose. As a result, I de-registered in 2018.
An investment advisor cannot put their company first and their investor first simultaneously. These standards do not apply to everyday people. These standards apply uniquely only to registered fiduciaries.
According to Investment Advisor Rules too much conflict exists with a licensed advisor’s desire to make wealth and maintain public trust of impartiality.
Despite numerous waivers, disclosures of conflicts, suitability statements, full disclosures on how much I owned, pre-signed permissions to remove money for personal uses, & constant quarterly reports on financial transactions any client in a personal company was a violation of several rules I was not aware of.
FAILING TO CHOOSE THE RIGHT PARTNERS
My senior partners failed to advise me properly on compliance issues. Little did I know +20 years in the business didn’t mean +20 year quality advice. Ultimately the responsibility found its weight placed on a rookie first time advisor. I was great at amassing assets but inexperienced in an evolving culture of complex rule compliance.
I always assumed full disclosure prior to acceptance of monies, permission of the investor to withdraw monies, & full continual transparency translated to permission. I willingly disclosed all my side deals because I focus on transparency. The documentation I have is quite extensive on each individual documenting their permission to do everything I did. My senior partners patted me on the back and gave me an “At a Boy.”
VOLUNTARY DISCLOSURE & VOLUNTARY SUICIDE
Irony is a jester jumping about the court. The object is make everyone appear as though you are the fool. In reality you are the most paid participant in the room. Sometimes you are the only one paid in the room. The fool is the one who showed up indebted to the court and fears the food may be poisoned.
Ironically my willingness to be transparent with the agency through voluntary disclosure was what created all my problems.
When my response after my initial voluntary disclosure was to make the language even more simple I was still given a hard time. I had everyone resign paperwork, including simple language, stating “A promissory note is not a complex financial instrument that is too difficult to understand”.
Even if a person states they cannot act in the capacity as a fiduciary, has someone agree to indemnify them, and states in writing they must seek independent guidance in a specific transaction the standard can still apply.
More important “misleading” can be used by an agency as a “broad” net to catch you in technicalities based on personal interpretations rather than written fact.
It is a hard lesson I learned. Anyone else with a license should take note as well.
What is allowed and not allowed has been defined. No longer is a licensed individual allowed to use creativity in a way to bolster innovation or penetrate a market of competition. While my story is not unique it does illustrate how intentions to innovate can result in destruction of a company, charges of slander & ultimately the loss of money if one fails to fully comply with a request.
The forceful removal from my personal companies post though agency intervention caused every company to fail. While I may have been a minority shareholder in each company, I was a very pivotal piece in pushing them forward. This is like removing Bill Gates right hand man from Microsoft in the early days. Microsoft may have failed in this example as the visionary steering the vision was gone before their vision completed. Awesome supporters are not the same as the original visionary leaders.
Justifying the action after years of leaving doesn’t show great detective work. It just proves the fact a company is destined to fail without its original leader.
My personality has always been to discover a “new” way to win. I always approach problems with unconventional solutions. It is in my nature to design something new. I am an illustrator since the age of 5. It is in my nature to create. Creation is unique. These tendencies translate to my business tendencies. Often, I think of methods to accomplish goals not easily encountered. There is a saying I love,
“There is nothing new under the sun.”
This statement is so true. Yet in my experience I frequently encounter people who never heard or encountered my ideas before. Often people frame me as some form of “Mastermind”. The only real thing I am master of is reading, studying, and looking to apply theory into real life scenarios. I am also not afraid to be the first to do something.
Being the first person to do something is usually framed as “Risky” or “Reckless” by those unwilling or afraid.
I am not that unique. I just do not like to sit on the sideline when all the conventional options illustrate denials. I am also not afraid to try something new even when everyone else is.
LEGISLATION EFFECTS OVER THE YEARS
Over the years legislators and government agencies have sought to reign in financial architects. The Securities & Exchange Commission sought to prevent scoundrels from enriching themselves off investor dollars. The intentions were pure.
I wholeheartedly agree people were hurt during the Savings & Loans Crisis of the 1980’s, the Dot Com Collapse of the early 2000’s and the real estate collapse of 2008.
The desire for the agency to protect unsophisticated investors was important and still is. The SEC is an important cornerstone to our US market. The point of this article is not bash the SEC. The SEC is important and without it scamming would definitely rise. This is about understanding how to balance accountability with creativity.
The central points of each catastrophe were really about 1) lack of disclosure, 2) unethical behavior (i.e. living the high life off investor dollars), 3) hiding fees & compensation, 4) failure of any obligation to disclose risk (i.e. saying “guarantee” all the time).
Rather than challenge regulatory agents through education to understand new ideas the opposite occurred. The purpose should be to encourage innovation and foster collaboration creation. The progression of the system turned to outright bans instead. The result eliminated all new ideas to innovate in a constantly evolving market. Look at Bermuda. Bermuda is the first country to fully respond to cryptocurrency by instituting standards, applications, and promoting opportunity.
I personally know attorneys at Appleby’s. I’ve worked with some on several projects. One of the attorney’s I personally know held a key role in authoring legislation. Every Bermuda regulator is very smart and keen to create opportunity. The converse we experienced was stiffening opportunity in 3 years worth of litigation. Now we have a market too scared to raise money (this is what has happened in the US see my article on TON).
By promoting the public to only invest into well established historically regulated enterprises, adhering to strict compliance frameworks, the wealth of the everyday American has eroded.
Creation does not work by saying “Only think this way.”
Do not believe me? Let’s see the results.
RESULTS SPEAK LOUDER THAN MY WORDS
I read an amazing article by Ray Dalio that sums up some vital statistics. As much as I don’t want to paraphrase it’s very difficult. So let’s just credit Ray for the entire writing below (including the charts). There has been little or no real income growth for most people for decades. As shown in the chart below, prime-age workers in the bottom 60% have had no real (i.e., inflation-adjusted) income growth since 1980. 1980 was when major regulatory reforms started (that is one big coincidence).
That was at a time when incomes for the top 10% have doubled and those of the top 1% have tripled.
The chart to the below shows the percentage of children who grow up to earn more than their parents has fallen from 90% in 1970 to 50% today.
This is for the U.S. population as a whole.
For most of those in the lower 60%, the prospects are worse. These are the same people our legislation aimed to protect. As a result of the aggressive protection mechanisms that focus on “preventing” things “before” they occur, while only having financial professionals promote historical models, we see the effect on the economy.
The effect is American wealth has been decimated.
The lesson of this article is simple. This is about understanding the nature of our system and its regulators. This article is also about choosing a side and staying on that side. The SEC plays a vital role and is needed. The value of an attorney cannot be understated. A good attorney is a must in today’s complicated environment.
Equally important is understanding that common sense sometimes does not work.
You cannot just be totally transparent and think you will be okay. Someone agreeing to everything and knowing everything before you do it does not make it okay. The markets have evolved to a point where common sense does not prevail. Coming up with new ideas that have no precedence can be dangerous in a country whose framework is based on historical models only.
America ranks twenty eight (28th) in education and these same people are chairing positions of power that attempt to understand innovation.
You cannot understand innovation with sub par education. Unfortunately the new generation has not been equipped to understand innovation; so innovation is shunned in lieu of embracing. For we always fear what we don’t understand.
My article on ICOs illustrates this point perfectly. The review of the SEC actions last year in my article published in Data Driven Investor shows how regulatory can work. To my previous fellow advisors stay in compliance. Remember your career field. Don’t cross like I did it doesn’t cooperate well. Innovation is for entrepreneurs not fiduciaries. Pick a side and stay on it.
To your knowledge success!
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM), Master Financial Planner (MFP) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license examination. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 8.0mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com.
Disclaimer: This information is not meant to be a form of investment advice or financial advice. Do not apply this situation to your own personal circumstance. Various risks include: business risk, investment risk, political risk, and other risks. This information is for informational and educational purposes only. Please do not reach out to the author for any investment strategies or philosophies. Please consult your own financial advisor or legal advisor for your own circumstance. Not a recommendation or endorsement of any kind.
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