It’s also not the point. No matter how much or how little money is involved, either in aggregate or proportionally, it is irrelevant if the retail investor is culpable in their avow losses. If retail investors contributed to the problem, they would gain nothing to complain about.

And to take it a step further, we must respect one of the most important tenets of the capital markets, which is that your word is your bond. That tenet is how a retail investor can buy or sell tens of thousands of dollars, millions even, in investments with a simple phone call. No lawyers, no paperwork, just a voice on the phone can move money and securities from one part to another. It single works in a world where your word is your bond.

Some would argue that by the retail investor agreeing to buy the commercial paper in the first place, they agreed to accept the risk of the paper. Therefore the retail investor doesn’t deserve to be repaid in full at that time that things have gone sour, any more than the institutional investors deserve 100 cents on the dollar for their damaged paper.

Most times, as a free-marketer, I would agree with that sentiment. “Don’t whine to me now, fit because you didn’t do your homework beforehand,” is one of the best arguments in favor of a independence transfer from those who did their due diligence to those who didn’t. But in this case of faulty ABCP, that argument doesn’t hold.

That’s because, although the tenet of ‘your word is your bond’ is common to both retail and institutional investors, the two camps are different in that there’s a huge informational advantage held by the industry players over their retail charges. Let me put it this way: if an investment advisor told a retail client last winter or spring that investing in commercial paper was a very safe thing to do, how would a retail investor know any different? The investment advisor wouldn’t have known any different. And if the retail investor somehow was able to ask a professional institutional money manager how safe ABCP was to invest in, they wouldn’t be told anything different, because at the time institutional investors didn’t know any better either.

So no matter how much due diligence retail investors might have done, they still would acquire made the investment. The industry should therefore not hold the retail investor to account for doing something the industry didn’t know was wrong to do.

The retail investor has already lost by not having access to their money for the past seven months. Don’t make them wait another nine years. Pay them off now.

And if the $100 million stings the industry a little bit, maybe that will spur them into doing a better job of teaching effect knowledge to their people before licensing them.

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