Those on the far right side of the political spectrum are not known for liking a lot of governing, but it’s probably fair to say that relatively few want less of it than Peter Schiff, the CEO of Euro Pacific Capital, a securities broker-dealer.
In recent testimony before the House of Representatives Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending, Schiff expressed some extreme positions on human-capital matters.
For one, Schiff called for a repeal of all federal workplace antidiscrimination laws. One of the reasons unemployment is so high among minorities, he opined, is that small-business owners are wary of the legal liability associated with various categories of protected minorities. “It is not racism that causes this discrimination, but a rational desire to mitigate liability,” he said. A true free market would punish employers that discriminate based on race or other criteria irrelevant to job performance, because those that based their hiring strictly on merit would have a competitive advantage, Schiff elaborated.
He also advocated a repeal of all laws mandating workplace conditions, overtime, benefits, leave, and medical benefits. “The more room the parties have to negotiate and agree on their own terms, the more likely a job will be created,” said Schiff. Again he cited the free market as a cleansing mechanism: companies that don’t offer attractive terms of employment will lose employees to those that do.
Somewhat less controversially, he also argued for abolishing both the minimum wage and extended unemployment benefits.
Outside the human-capital arena, he subsequently told Fox Business News that he doesn’t even think there is any need for securities regulations. He said the free market would be a much better regulator of conduct by brokerage firms than the existing “regulators,” by which he presumably meant the Financial Industry Regulatory Authority (FINRA), which regulates brokerages.
During the House hearing, Schiff specifically griped about FINRA regulations that require broker-dealers to get regulatory approval before hiring more than a certain number of brokers. He related his own experience of being fined $15,000 and running up more than $500,000 in legal bills to avert a much stiffer sanction for what he said was an inadvertent violation of such regulations. Despite a strong desire to open new offices and hire a lot of new brokers, he said, Euro Pacific has been under a mandated hiring freeze since 2008. “I started my firm in 1996, and there is no way I could have done that today. It costs me millions of dollars a year just to comply with rules and regulations that are not doing anything to protect my customers,” said Schiff.
The reasons for the hiring restrictions are valid, says Mark Astarita, a securities attorney with New Jersey-based Beam & Astarita. That is, FINRA wants to make sure brokers are adequately supervised: every broker-dealer, upon starting up operations or being purchased, enters an agreement with FINRA stipulating how many brokers it can hire without securing regulatory approval and a required ratio of supervisors to brokers.
Still, Schiff has an ally in Astarita. In a post on the Securities Law Blog, he wrote: “Typical FINRA. Rather than assist compliant firms in growing their business, it continually finds ways to stop expansion. The reasons for the regulations are valid; the rigid enforcement of the regs, rather than working with firms to permit expansion, is the problem.”
While it’s debatable whether that is an appropriate role for the FINRA, in an interview with CFO Astarita called the idea of a brokerage being stalled from hiring for three years “ridiculous.”
“It’s certainly not FINRA’s job to hamper broker-dealers,” says Astarita. “They have a ‘gotcha’ mentality, and of course they are funded partly by the fines they levy.”
Euro Pacific has been fined nine times since 2005, but for a cumulative total of just $257,500. FINRA declined to comment for this article.