Charles Schwab Buys Compliance11. What Does This Mean for Customers?
by Larry Goldfarb
The news that Compliance11 was purchased by Charles Schwab moves the employee conflict of interest technology segment in a new and very different direction. In a press release on Friday October 28th, (http://www.thestreet.com/story/11292828/1/schwab-expands-commitment-to-designated-brokerage-business-with-plans-to-acquire-compliance11-inc.html) Schwab agreed to purchase Compliance11 and integrate it with its Designated Brokerage business.
According to Trish Cox, senior vice president of Schwab Corporate Brokerage Services, “By making Compliance11’s technology available with our own investing, trading and reporting systems we can create a one-of-a-kind solution that brings great advantages to the corporate marketplace.” She continued, “This combination of capabilities will put Schwab in a unique position.”
So what does one make of this development for the employee conflict of interest segment of the market?
On the positive side:
• Certainly for the small and mid-size firms, there would be an attraction to working with Schwab to get a significant discount on the product. Moreover, even non customers of Schwab would get a lower price owing to the marketing advantages inherent in the product.
• It’s going to be advantageous to move more of your firm’s business to Schwab.
• The ability for Compliance11 to continue as an ongoing concern is now assured.
On the negative side:
• It may be more difficult to get brokerage feeds from the competitors of Schwab. Schwab would be privy to all of the competitive features that some of these firms may not want to disclose.
• Since Compliance11 is a multi-tenant, Software as a Service company, how should your firm feel about entering firm trades into the Compliance11 system now that Schwab will host the data and owns the company. Some of the firms using Compliance11compete directly with Schwab.
• Would you get the same type of service if you use the employee trading product without engaging Schwab’s Designated Brokerage Service?
There are probably others. I’m not sure at this point if it is good or bad for customers. On a more personal note, as many of you know, I am a co-founder of Compliance11. I remember the pain of finding the right personnel, signing the first customers, and making payroll. And in the beginning, trying to speak to a firm like Schwab made me feel like we were speaking two different languages. In the end, our concept has been validated, and the technology celebrated. It will interesting to see how this plays out.
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