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The Securities Investors' Bill Of Rights (SIBORAP): Part 4/4

Stock-Markets / Market Regulation Oct 31, 2008 - 09:49 AM GMT

By: Steve_Selengut

Stock-Markets Best Financial Markets Analysis ArticleSIBORAP includes these ten specific sections: (1) Product Transparency, (2) Regulation and Education, (3) Protection from Speculators (4) Control of Hedge Funds, (5) Brokerage Account Statements, (6) Retirement Account Investments, (7) Executive Compensation, (8) Corporate Financial Statements, (9) Taxation of Investment and Retirement Income, and (10) Transactional Greed and Fear Controls.

Section Seven: Executive Compensation - continued from Part Three of the SIBORAP report.

Every dollar paid to corporate executives, directors, and employees (in any form whatsoever) in excess of two million dollars would be matched by a ten-cent per share extra dividend to all shareholders and a 10%-of-annual-pay bonus to all employees.

All golden parachutes, separate "non-qualified" retirement plans, stock option and deferred compensation programs, and others that do not benefit all employees and shareholders will be unwound over a three to five year period. Any employee who receives in excess of $250,000 in compensation must buy (and retain while employed by the company plus 3 years) 10 common shares for each $1,000 of his or her highest career compensation--- retroactive three years.

Under SIBORAP, any corporation that reports profits in any year, or that pays performance-based bonuses to any employee, must first pay a "bonus" dividend to its shareholders equal to no less than 25% of the profits and proposed bonuses.

Section Eight: Corporate Financial Statements.

Investors have a right to have confidence in the numbers presented in corporate financial statements. SIBORAP mandates that all publicly traded companies employ an independent auditing firm to: translate company financials into simplified documents comprehensible to non-accountants.

These auditors would be rotated among similar companies and industries, with at least three years between appearances at any one company. Their compensation would be a flat rate plus rewards for identifying inaccuracies, inappropriate practices, and outright fraud. Executives in the chain of command from where the problems were found would be personally responsible for the rewards paid to the auditors.

Auditors would rank the financial status of companies based upon cash flow data, debt to equity ratios, operating profitability, industry trends, and other fundamental indicators of value.

Section Nine: Taxation Considerations.

The current tax code encourages, even dictates, investment errors, and creates a larger burden on all levels of government than is necessary. Investors have a right to formulate their investment and retirement plans without having to worry about changing tax code requirements.

Ironically, the present Social Security structure does more harm than good to both the economy and retiree benefit packages. SIBORAP allows most employees to "opt out" of Social Security in favor of making (smaller) mandatory contributions to a fully funded and guaranteed, private, retirement benefit program.

Employers would be freed of this employee benefit burden, but would be required to use their savings to: add jobs, reduce prices, increase shareholder dividends, or improve employee health benefits. Employees will have more money to spend, and thousands of new jobs will be created within an existing industrial infrastructure--- not to mention careers in (private sector) corporate oversight.

As implied above, SIBORAP prohibits the taxation (by any government) of: (1) any form of retirement income received from any employee benefit plan, and fixed-income-annuity funded Social Security benefits, and (2) any form of investment income, foreign or domestic, received by absolutely any entity that complies with SIBORAP.

SIBORAP reinforces the rights of investors in particular, and citizens of the USA in general, to keep what they have earned, created, and inherited during their lifetimes, and to pass their estates to their heirs unencumbered by any form of taxation at any level. All inheritance taxes are illegal, retroactive twenty years.

Section Ten: Transactional Fear and Greed Controls.

Investors have a right to be emotional, irrational, fickle, stubborn, confused, fearful, inexperienced, hindsightful, and greedy. Nothing the most thoughtful and caring professional can say or do will prevent the errors that many of us look back on with a frown and a headshake.

SIBORAP will provide investors with better information, introduce rules that will help them benefit from proven asset allocation and diversification techniques, and implement controls on both cold blooded speculators and blood thirsty tax collectors. But couldas, wouldas, and shouldas cannot be legislated out of the investment formula--- even with trading halts.

In reality, financial institutions won't be required to emphasize long-term investment thinking or to encourage cycle-savvy investment behavior. But the information is available and the experienced wisdom is out there for the reading.  SIBORAP will help the lazy investor in his pursuit of wealth, but pulling the right decision lever is every investor/voter's lonely responsibility.

As to the global investment environment that should spawn a SIBORAP--- that other value investor, the guy from Omaha, put it pretty clearly just the other day in the New York Times: "Be fearful when others are greedy, and be greedy when others are fearful."

Help put a SIBORAP in your future--- vote!

By Steve Selengut
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

Disclaimer : Anything presented here is simply the opinion of Steve Selengut and should not be construed as anything else. One of the fascinating things about investing is that there are so many differing approaches, theories, and strategies. We encourage you to do your homework.

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