WALL STREET WEEK Securities industry takes stock of its tarnished image

Investors' satisfaction with their brokers is at its lowest level in years, according to a survey.
BOCA RATON, Fla. (AP) -- With all the recent improprieties on Wall Street and scandals involving stock analysts, it's no wonder that investor confidence has plunged so dramatically.
That's why rebuilding investor confidence was the theme of the Securities Industry Association's annual meeting this past week.
"The public and our investors are troubled with us. But we hear what they are saying, and we're taking it very seriously," SIA president Marc E. Lackritz told the nearly 450 brokers and dealers attending the conference.
It's going to be a tough task to win back investors who lost thousands of dollars when the market bubble burst. Rebuilding the public's trust is a long-term process, one that will take months -- if not years -- to complete.
SIA officials here cited steps the association already has taken, such as adopting voluntary "best practices" for stock researchers that address compensation, stock ownership and disclosure.
Survey
The group's efforts have been made for good reason. In its annual investor survey, the SIA found that investors' satisfaction with their brokers is at the lowest level since the association began conducting surveys in 1995.
This year, the percentage of investors who said they are "very satisfied" fell to 45 percent from 59 percent in 2001 and 67 percent in 2000.
Those who said they were very satisfied with the securities industry overall fell to 9 percent this year from 22 percent last year.
Asked to identify the main issue facing the securities industry, 41 percent said "dishonesty," a huge jump from the 8 percent who said that in 2001.
Asked whether they considered certain issues to be big problems for the industry, 68 percent said the "industry's reluctance to punish wrongdoers," up from 41 percent in 2001. Greed was cited by 66 percent, up from 52 percent in 2001.
And, 55 percent believe that the integrity of research analysts is a big problem, the survey found. This year was the first time the question about research analysts was asked.
Distressed investor
William Ellermeyer, a 65-year-old investor in Irvine, Calif., was not at the Boca Raton conference, but he said in an interview that he was distressed with the securities industry.
"I don't trust the analysts anymore," Ellermeyer said. "They are conflicted. The brokerage firms have their hand out in the other direction, getting IPOs."
Earlier this year, Ellermeyer, an executive career consultant, said he switched brokers, moving from Merrill Lynch & amp; Co. to a smaller local firm that he said he trusted more. This past spring, Merrill Lynch and the New York Attorney General's office reached a $100 million settlement for conflicts of interest involving stock researchers.
Ellermeyer said he was burned by Enron. Several analysts continued to rate the energy trading company strongly right up until its collapse in December. After losing about $12,000 on that investment, Ellermeyer said he's doing more of his own investment research.
"Amazingly enough, I have become a more aggressive investor, so I know what I am buying," he said.
He wants to see brokerage firms do their part too, severing the ties between analysts' pay and investment banking revenue. And, he wants Congress to pass tougher regulations on corporate malfeasance.
Of course, many investors are waiting to see if the new Republican-controlled Congress will push forward with stricter laws against corporate fraud.