The Securities Investors’ Bill of Rights (SIBORAP) – Part Four

The Securities Investors’ Bill of Rights (SIBORAP) – Part Four

SIBORAP 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

Every dollar paid to corporate executives, directors, and employees (in any form whatsoever) in excess of two million dollars would be equaled by a ten-cent per proportion additional 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 assistance 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 shared 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 hypothesizedv 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 use 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 the minimum 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 responsible for the rewards paid to the auditors.

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

Section Nine: Taxation Considerations.

The current tax code encourages, already 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 assistance packages. SIBORAP allows most employees to opt out of Social Security in favor of making (smaller) mandatory contributions to a fully funded and guaranteed retirement assistance program.

Employers would be freed of this employee assistance burden, but would be required to use their savings to: add jobs, reduce prices, increase shareholder dividends, or enhance employee health benefits. Employees will have more money to use, and thousands of new jobs will be produced within an existing industrial infrastructure— not to mention careers in corporate oversight.

As implied above, SIBORAP prohibits the taxation (by any government) of: (1) any form of retirement income received from any employee assistance 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, produced, 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 specialized 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 assistance 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.

In reality, financial institutions won’t be required to press long-term investment thinking or to encourage cycle-savvy investment behavior. But the information is obtainable 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 ecosystem that should create 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!

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