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History of Chapman, Spira & Carson, LLC.

The history of Chapman Spira & Carson and that of Robert Spira, one of the founders of the company, are somewhat intertwined. For about 35 years, Mr. Spira worked in the brokerage industry where he started out as a Register Representative in his home town of Chicago. He then spent the next 16 years as an officer of Walston & Company, Inc., which was the second or third largest brokerage firm in the country at the time. As the decade of the sixties came to an end, it was readily apparent that major changes were about to occur in the Securities Industry and it would never be the same again. Chapman, Spira & Carson, LLC was founded in 1989, the first non-broker-dealer the Spira had been associated with in his working career. 

From the time Spira became registered, it took almost 10 years before the first million share day occurred on the New York Stock Exchange. When you compare that to the billion share volumes that have become de rigor, you can see the magnitude of change that has occurred. The daily volume today would have encompassed three years of trading in the early 1960's. Meanwhile, there were other changes taking place. Institutions were playing an ever-increasing role in the total volume of the Exchange. From a basically "old boy" retail business, the institution investors (mutual funds, bank trust department, insurance companies, and hedge funds) soon became the driving force pushing the market volume and soon they accounted for over 80 percent of the volume. 

As changes started occurring in earnest, Spira determined that the future of the industry was shifting dramatically; if one wanted to be successful in the future, New York was the place to be. The observation turned out to be correct, and even more dramatic changes started occurring. Negotiated commission rates were first ordained in 1975 and something that was once considered a non-event now played havoc with the established players. Smaller firms were able to compete with their less flexible and larger competitors, and the volume of business shifted dramatically. Issues such as having institutional investors pay up for research also surfaced, and the questions that accompanied this change still have never been totally resolved. Moreover, the passage of ERISA give certain protection to all investors from a legal point of view, the creation of SIPC gave investors some peace of mind that even if a brokerage firm failed, they would not lose all of the money. 

Mr. Spira and many of his associates became players and Street historians (see Bull Street) concurrently. As economic and regulatory innovations arrived ever more quickly, excess SIPC insurance soon became a big enticement due to the fact that investors could be covered for literally any amount of assets that were held in their brokerage accounts. Depository Trust Company (DTC), a financial clearing organization for securities, made it possible to rid the industry of stock certificates and created a database of certificate numbers, doing away with paper. Thus, all of DTC's members could deposit their electronic certificates into a database and withdraw, lend, sell or destroy them with the click of a button. No one had to run down to the brokerage firm to delivery physical stock in four days. Because the system worked so well, the delivery time was moved up to one day. 

Principal types of businesses also started to sprout all over the landscape. Underwritings, investment banking and derivatives became attractive. The Chicago Board of Options Exchange (CBOE) created a public traded option for the first time and soon almost every other major exchange in the country soon followed suit. The commodity exchanges such as the Board of Trade and the Chicago Mercantile Exchange began to compete with the stock exchanges for business. They created innovative products such as currency trading and government bond futures. Those institutions carried a tremendous advantage into the financial arena due to the fact that they were regulated by the Commodities Future Trading Company (CFTC), and in light of the fact that they were trading commodities instead of securities, the margins or leverage could be substantially more. People that wanted to gamble and institutions that wanted to hedge their positions gravitated to these markets. 

As the U.S. Government mandated ever-increasing transparency, several of the stock exchanges could no longer compete. The venerable Salt Lake City Exchange and the Mining Exchange in Idaho closed their doors. Under the pressure of increased regulation and major technological advancements, the need for separation of banking, securities and insurance was no longer seen as necessary. However, Congress, in repealing the Glass Steal Act (created to literally punish banks for something they probably had nothing to do with in causing the crash of 1929), caused certain dislocations to occur. Due to the fact that Securities were nationally controlled by the SEC, locally controlled by State Regulators, almost every Bank had to become a part of the National Banks in order to survive, and Insurance Companies were state regulated, digestion became a probably. Not only did everyone try to buy everyone else and big became good, but a more harrowing event was occurring. The new acquisitions couldn't communicate with each other. 

Wang, which had dominated bank software, went out of business and legacy software became a way of life in banking. Thus, one department couldn't correspond with the other, and a bank taking over another bank literally created a synergistic nightmare. The securities industry was no better. The volume continued to increase geometrically, but the rates collapsed. As an example, the two dollar broker on the floor of the exchange who probably averaged that amount per hundred shares executed today might get 10 cents. At first blush, you might think that the volume had increased so dramatically that he was still ahead of the game. That would not be correct; the NYSE and literally every other exchange started implementing electronic executions which, for the most part, were free. Soon a vast majority of trading utilized that vehicle. The recent proposed merger of the New York Stock Exchange and a modest electronic trading firm with excellent technology shows where the world is headed. 

However, things were not necessarily getting any better. Bankers Trust Company not only insulted but lost substantial money for major clients such as Procter and Gamble who has a history of being a non-litigant and was getting sued. Recordings showed that Bankers' heart was not to operate in the best interests of their clients. A few years later, Morgan Guarantee seemed to have lost track of their controls and also became embalmed over their own mistakes. Today, Morgan lives on, but they are controlled by a serie of merged partnerships that include Chemical Bank, Manufacturers Hanover Bank and Chase Manhattan Bank who all needed to grow or die. Bankers Trust was taken over by Deutschland and has only become a Harvard Business School study of how not to run a business. Rumors on the street held that Morgan couldn't figure out how to unravel some of their more complex derivative transactions. 

The banking industry consolidated the brokerage and insurance industry and came across a bete noire looking to make a name for himself as Attorney General of the State of New York. His name was Elliot Spitzer. Spitzer amazingly discovered that, contrary to what he had learned in school as ethical behavior, Wall Street firms were exchanging stock in hot initial public offerings with senior management of large public companies for their corporate finance business, a tasty morsel indeed. Even the scion of Ford Motor, a man born with a silver spoon in his mouth became caught up in the lure of Wall Street payola. But Spitzer wasn't nearly finished with his detective work, he soon uncovered the fact that the fund industry was allowing their friends to steal millions from their shareholders by front-running; a nifty trick that takes money out of your pocket and puts it in theirs without you ever knowing it was gone. 

Attorney General Spitzer also discovered, to his horror, that brokers in the insurance industry business were submitting phony bids. Meanwhile their cousins, who were writing insurance, were becoming balance sheet fiction writers while many of their compatriots were defrauding the shareholders with phony reinsurance transactions. Spitzer, who made a name for himself by playing Robin Hood, will probably be doing more of the same as Governor of New York. Not necessarily a pleasant prospect for big business. But can you imagine Spitzer's dismay when he became obligated to do in one of his old friends, kindly tricky Dick Grasso (who at the time was the Chairman of the New York Stock Exchange)? Grasso was victim of infinite greed and was in the process of lining his pockets with the help of fellow Board Members of the Exchange. Wall Street had not been subjected to this sort of monetary insatiability since the 1930's when the head of the Exchange went to jail for fraud. 

During this same period, China emerged as a world class player and has certainly put the fear of God into the entire Pacific Rim. I would certainly not want to be Japanese right now, with the dragon breathing fire all over the region. China's hard currency reserves, when combined with those of Hong Kong, are now the highest in the world and are starting to show interest in buying American public companies. Simultaneously, India is shrugging off decades of bureaucratic malfeasance and has emerged as a software expert and a leader in call centers. They are beginning to recognize the rights of Intellectual Property holders and are rejoining the world community after fifty years of trying to become the world's most infamous neutral. 

In order to control inflation, the Federal Reserve is raising interest rates on a regular basis. The war on terrorism only seems to be annoying the Muslims. The price of oil is out of control, and if it wasn't for the fact that we are importing so much from China, inflation would be already out of control. The real-estate market is also overheated and will begin its collapse as rates increase. Interestingly enough, we could see a situation where long term and short term rates are almost at parity. This would be a disaster for the banking industry, which borrows long and loans short. 

The above facts, along with additional nuances too numerous to conceive of, create anomalies in what is said to be an orderly market. The more anomalies that are created, the more opportunities exist. An interesting example of such an anomaly would be the Hunt Brothers, thinking they could corner the silver market and not conceptualize the fact that people would be willing to melt down their own silverware at certain prices. Those that were able to take advantage of this lack of analysis were able to sell silver to Hunts (such folks as Armand Hammer and Merrill Lynch) until the cows came home. Bache and Company, a prestigious Wall Street broker, almost tanked and was taken over by Prudential. Interestingly enough, over each decade from 1950 on, 80% of the brokers had a different name by the end of the decade than they did at the beginning, if they were still in business. 

CSC as a company and individually is very entrepreneurial as we have become circumspect relative to our clients. Sometimes they are their own worst enemies and a bad client is just as bad as bad investment banker. We seldom represent paranoid companies or individuals, because they take all of the enjoyment out of what we do. Because of their unreasonable fears in closing a transaction, whatever they have to offer, no matter how ingenious, usually dies an ignominious death. Their product is their baby and they don't want to let it loose. The other anathema to our firm is the perpetual shopper that has covered the waterfront looking for money at the cheapest possible price. While this may be the thing to do in most industries, in ours, there are any number of firms that are only interested in collecting an upfront fee and then routinely suffer a sudden loss of memory where the client is concerned. We enjoy the role of being Wall Street observers as well as players in the financial game. Down here, one is either good or dead. We prefer to continue breathing the rarified air of the Street rather than the alternative. 

Other than the above abnormalities, we all thoroughly enjoy what we do. Most of us would pay to come to work every day to see the world's newest technologies and how they evolve. We are in the most exciting arena in the universe and enjoy sharing marketing, financial and ethical victories with our customers. We invite your inquiry and our 16 year old firm looks forward to meeting your company. We do it the old way, we earn it.

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2005 Chapman, Spira & Carson, LLC
111 Broadway. New York, NY. 10006 Tel: 212.425.6100 - Fax: 212.425.6229

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