Friday, Aug. 16, 2002 | 11:09 a.m.
Barry Friedman, 62, a retired salesman and a resident of Sun City Anthem for the past 3 1/2 years, sighs as he recalls the 700 percent profit he made investing in technology stocks in the '90s.
Friedman said he has lost more than 60 percent of his retirement fund in the current market slump and knows of several residents at the age-restricted community in Henderson who have had to postpone their retirement because they cannot afford to stop working.
"We were invested heavily in technology. We diversified after the stock market started sinking ... The joke now is that there are 60- or 70-year-olds who have the retirement funds of a 30-year-old," said Friedman, one of the participants at a forum on retirement security Thursday at Sun City Anthem. "There's no way to recoup our losses but we can learn to protect what we have. The key now is preserving capital with whatever funds we have remaining."
Friedman's story is one of many echoed throughout the nation since revelations of corporate fraud rattled the stock market and investor confidence and affected millions of American retirees' 401(K)s -- stock-market linked company pension plans.
Addressing more than 170 residents of Sun City Anthem, Sen. Harry Reid, Robert Glauber, chairman and CEO of the National Association of Securities Dealers (NASD) and Mary Schapiro, NASD's vice chairman, tried to allay concerns about retirement security and educate Nevada seniors about their investment options and what's being done on the legislative front to protect investors.
The forum was one of several programs organized by Sun City Anthem's 117-member Finance Club -- created in 1999 to educate residents about investments and exchange investing experiences.
"For a lot of people, looking at their 401(K) accounts, mutual funds or retirement plan balances these days is disheartening and downright scary," Glauber said. "We're here as regulators, not cheerleaders. But while we can't tell you where to put your money, we can explain some of the steps that are being taken to protect investors and make the markets more transparent and fair."
He cited corporate accountability legislation that was signed on July 30 by President Bush. The new law quadruples sentences for accounting fraud, adds criminal penalties and prison terms for securities fraud, imposes restrictions on accounting firms that do consulting work for corporations whose books they audit and establishes a federal oversight board for the accounting industry.
"Will this make a difference? If properly staffed and implemented, I am convinced that it will. Last year alone, NASD expelled, suspended or barred more than 800 participants from the broker/dealer industry," Glauber said. "And early this year, acting jointly with the SEC (Securities and Exchange Commission), we fined one of our member firms $100 million for violations in allocating 'hot' initial public offerings."
Glauber said the NASD, which recently added more than 60 investigators and prosecutors, is investigating several prominent Wall Street analysts, proposing new rules governing IPOS and analysts and cracking down on analyst conflicts by improving disclosure.
Schapiro agreed. "We're reviewing more than 80,000 ads in print and on TV, radio and the Internet to ensure that securities advertising is accurate and free of misleading claims. We've even begun to build a culture of transparency in the bond market."
But Friedman remains skeptical.
"The real sad part is that even though all three speakers tout due diligence ... when you can't have faith in CEOs or the board of directors that's supposed to watch out for shareholders or when you have auditors that lie or analysts that don't do their homework ... we really have no reliable source to check the facts. Nothing has changed until brokers start calling investors to warn them when they should get out of the market."
Despite his misgivings, Friedman said he hasn't been scared away by the stock market's volatility and is watching for investment opportunities. "I'm buying stock but I'm now very selective. For example, I buy Wal-Mart stock because I trust their accounting. I know their philosophy and I understand who and what their competition is."
Retirees Thursday questioned whether stock options should be counted as expenses in companies' earnings reports.
The move to expense stock options was urged by corporate reformers who argue this more accurately reflects costs to shareholders than the current system, which has options listed in footnotes of earnings reports.
NASD's Glauber stressed that the NASD doesn't have a silver bullet to take the risk out of investing, but can offer a range of resources to help investors educate and protect themselves.
These include providing information about a broker's disciplinary history, checking investments that investors aren't sure about, providing a neutral mediator or arbitrator for an investment-related dispute and tips on how to keep track of investments.
Schapiro advised investors to not act in panic or haste, diversify and carefully analyse their personal financial situation and needs, and determine what and when they may need to pay for retirement or their children's college education.
"Act your age. If you're 25, you have 50 years for stocks to rebound from even a terrible bear market. If you're 75, you should very likely have more of your portfolio in bonds and short-term investments," she said.
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