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Re: Intermediaries Assisting Clients to obtain Financing or Equity
Chapman, Spira & Carson - Disscusion

From: Chapman Spira and Carson
Date: 4/14/99
Time: 4:19:40 AM
Remote User:


I think in the first instance, if the client didn't know that the intermediary had no clue where to go to service his client's needs, he would probably be fired or shouldn't have been hired in the first place. The mere fact that the client's representative contacted you indicates that prima facia, he did not know directly how to get the job done, which if he took funds for the assignment and represented to his client that he was able to take care of his client's needs, this was a subterfuge and at least unethical.

On the other hand, legitimate intermediaries are critical to our society. The case you indicate is would be better illustrated by the fellow in California that has 1,000,000 shares of IBM to sell and the guy in New York that has the same amount of the stock to buy. If the seller but his order into the market without first trying to find a buyer he would substantially depress the price of the stock and get a substantially reduced net sales figure. The buyer under the same circumstances would pay more. If it weren't for the stock exchanges (intermediaries) there would be no central place to go with the order and a buyer may never be found. In the meantime, the in the real world, the order to sell was given to a broker in California (an intermediary) and that broker found a broker in New York (an Intermediary). They found each other through as service called AUTEX (an intermediary) and everybody got did substantially better than they would have done without their help. Try and think of what financial businesses don't have intermediaries. Usually, these people are highly professional and well trained. They spend their time making new contacts to better serve their clients. Under the circumstances, not to use one is sinful.

The argument that a client would be unhappy if his representative found an intermediary flies in the face of the law itself. A person representing another person for a fee has a legal and moral responsibility to the best possible job for his client. If that means going through an intermediary, than that is what he should do. If on the other hand, the client has instructed his agent the he wants to committee financial suicide, then of course, there is no legal issue.

Again, let me reiterate, that case you pose is skewed because apparently the intermediary misrepresented his abilities in the very beginning and it would seem, he is not conforming with what we would understand to be his fiduciary responsibilities to his client. It would seem to us that this strange instance is only a matter of a representative who has misinformed his client as to his abilities to get the job done and after he had told his client how wise he is, he becomes afraid that the use of your services, that of a true professional would expose the game.

Last changed: March 17, 2000