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Money Buzz 10/02

Detecting phony currency, a federal bill to loosen the tight capital market and more
October 1, 2002
URL: http://www.entrepreneur.com/article/55462

Spot a Fake

It takes more than a good eye--or your average currency tester-to spot a fake bill these days. Counterfeiters are taking advantage of modern technology to turn out bogus money that's capable of acing tests that check paper and ink quality. "Then, when the money is deposited, the bank scans it and tells the business 'You had $400 in counterfeit money,' and the business is out that amount," says Anna King, director of marketing for Miami-based Computip.

Using a microprocessor programmed to check against multiple "fingerprints" found on genuine bills, Computip's portable Cash Tester CT 2002 detects virtually all types of counterfeit currency, says King, and enables any business to scan bills at the point of sale.

While the prospect of detecting and turning away phony currency has appeal-especially with a new color $20 bill due out next year-some say sliding each bill through a testing device will be too time-consuming. "It isn't feasible given the fact that most retailers are reluctant to hold up checkout lines," says Mike Duff, senior editor at DSN Retailing Today magazine. "They'll take a few counterfeit bills to not bump up against customer convenience."

Capital Infusion

The tight capital market may soon loosen up a tad-if Sen. Kit Bond (R-MO) can succeed in his recent effort to steer an influx of investment capital into Small Business Investment Companies (SBICs). Under current law, tax-exempt entities such as pension funds and university endowment funds cannot invest in privately owned SBICs-SBA-regulated companies that provide small businesses with long-term loans and equity investments-without incurring a tax liability known as "unrelated business taxable income" (UBTI). But, thanks to the Small Business Investment Company Capital Access Act (S.2022) Bond introduced in the spring, they may soon see a reprieve.

"Tax-exempt entities have expressed interest in investing," says Bond, "but they hear about the UBTI rules and head right out the door." Axing the UBTI ruling would bring an immediate capital boost, says Bond. "A conservative estimate would be a $200 million increase in the SBICs' investment capital in the first year and $400 million in the second year," says Bond, who plans to push the bill in the next session of Congress.

Although optimistic about the bill's prospects, Bond is reluctant to specify a timeframe for adoption. "The way this body has been functioning, I'm not even going to hazard a guess," he says. "But it's a good idea, and ultimately good ideas usually get adopted sometime."

Falling for Fees

Commission-based trades have long been the norm in the brokerage account biz. But the crisis in investor confidence over the past year may change that. More and more clients are trading in their pay-per-trade accounts for fee- or asset-based accounts with annual fees. Why the shift? Both recent market volatility and concerns about ethics and potential conflicts of interest are driving the trend, asserts Ken Evason, president and CEO of Milwaukee-based Jacobus Wealth Management, adding that tying fees to assets under management rather than the number of trades more closely aligns the interests of the client and his or her broker. "Clients are saying, 'We want somebody who is objective and doesn't have a stake in a particular judgment of recommendation,'" he explains.

Making the switch from a transaction-based to a fee-based account may necessitate changing brokers. While large brokerages, such as Merrill Lynch and Morgan Stanley Dean Witter, offer both options, many boutique brokerages offer only one or the other. But before you make the move, advises Evason, be sure it's right for you. Fees typically range between .75 and 2.25 percent of assets, with larger accounts winning lower rates. "Most firms tailor fees to the level of assets under management and the services the client wants," says Evason. "To really benefit, an investor would need a portfolio of $1 million or more."


Jennifer Pallet is a New York City-based freelance writer specializing in business and finance.

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