Letters to the Editor
In the Beginning
I very much enjoyed Charles Ellis’s article on the changing role of the securities analyst (“Coming of Age,” Winter 2009) and feel his description of the evolution of the industry is accurate. I join him in hoping that the profession continues to regain respect and do work of real value. However, his depiction of the early history of the analyst is not complete without a discussion of the roles of Shearson, Hammill & Company or Smith Barney.
When I joined Shearson in 1960, it was known as “the firm that research built.” I believe that Shearson’s fundamental research department, which Murray Safanie started in 1919, was the industry’s first. The senior management was comprised entirely of analysts—from Walter Maynard to Walter Mintz and Donald Cecil. The sales and asset management businesses were built around equity research, and we launched a very successful annual report titled “Uncommon Values in Common Stocks.” Smith Barney also had a business model built around research, and the two companies were the first brokerage firms to launch retail mutual funds.
Heath McLendon
Retired from Citigroup Smith Barney
The Shot Heard Round the World
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© 2009 Gail Samuelson Harry Markopolos holds up a silver whistle presented to him by the Boston Security Analysts Society, February 11, 2009. |
I first met Harry Markopolos in 2002 at a society leaders meeting of AIMR (Association of Investment Management and Research, now CFA Institute). At the time, he was president of the Boston Security Analysts Society and was conducting a meeting including volunteer presidents and officers from the largest of the more than 100 Chartered Financial Analyst® societies around the world. Having been involved with options for most of my career, I was particularly interested in meeting Harry since he was chief investment officer of one of the largest institutional option managers in the country, Rampart Investments.
Harry conducted the meeting brilliantly. His forceful and engaging manner would, years later, be showcased both before Congress and on 60 Minutes. He had a way of phrasing and emphasizing points that made his comments simply unforgettable. His “Roar like a mouse and bite like a flea” statement to Congress and “Toe-tag the victims, count the bodies, and try to figure out who the crooks were” line on 60 Minutes are prime examples of his vernacular. Behind comments like these, which often succeed in estranging people of power and position, is a terrifically insightful and intelligent person.
Harry first contacted me about Bernard Madoff in 2005, soon after he left Rampart Investments. He laid out his suspicions cogently and asked my opinion. I confirmed his misgivings about the remarkable consistency of returns and lack of a trail of trades, and later that year Harry rewarded me for the brief time we spent on this conversation by listing me as an expert in his SEC submission. In the daily frenzy of managing investment positions, I had almost forgotten our discussion when the Madoff scandal finally broke and Harry’s fears were confirmed.
Harry had begun his vigil by trying to uncover an unethical business competitor. Once he’d left Rampart, his continuing commitment to the investigation was spurred more by his passion to right what was wrong than by his desire to enhance his position in the investment business (although his fraud examination practice did benefit from the subsequent publicity). Like a bulldog, he kept attacking. But unfortunately for everyone, Madoff’s downfall came about with the collapse of the Ponzi scheme rather than because of a preemptive strike by Harry. For regulators, Harry’s logical conclusions were worthless without hard evidence from an insider.
Harry Markopolos, an unassuming investment professional, has fired a volley of bull’s-eye shots at the greed and shamelessly blind ambition that are far from being pathologies peculiar to Madoff alone. Markopolos’s solitary activism, fine intellect, and dogged persistence need not be such rare qualities; they should be the model for professionalism in this industry.
Walter V. (Bud) Haslett Jr., CFA, FRM
CFA Institute
Editorial board, The Investment Professional
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