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The Wolf of Wall Street: Fact vs. Fiction

Pras Subramanian

If you’ve seen Martin Scorsese’s The Wolf of Wall Street, based on the book by Jordan Belfort of the same name, you most likely hold one of two diametrically opposed opinions on the film. Either you think it’s a hilarious, over-the-top re-enactment of Wall Street’s party culture of the 90s, or a dark and debauched look at men who had no shame in committing securities fraud, as well as checking their morals at the office door.

Judging by box office numbers, the film starring Leonardo DiCaprio and Jonah Hill has been soaring like a high-flying technology stock, and has also been a big winner for Scorsese’s portfolio, as it is now his top-grossing film.

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One man who knew some of the players in the boiler room known as Stratton Oakmont depicted in The Wolf of Wall Street is Josh Brown, known these days as the Reformed Broker. Brown tackles the questions many people are asking regarding Belfort’s portrayal of a wild and out of control Stratton Oakmont in the movie and book.

The Real Stratton Oakmont

Brown maintains that some exaggerations exist in the movie, but the company culture was pretty spot on. “When I started in the business … a year or two after Stratton went down, they busted all these firms, and the survivors set up their own firms. They decided they would do this [business] without ‘chop stocks’ (AKA pink slips, or penny stocks), we’re going to do this with legitimate stocks, but maintain the same Stratton culture of aggressive sales, and working all day,” among other things.

Brown recalls that 20 years ago the fraternity-based, debauched culture was alive and well, but what enabled this behavior was a lack of mobile phones and the Internet to disseminate images of scandalous activities like “dwarf tossing” and exotic dancers working the trading floors. If anyone saw anything risqué happening now, “they could capture it on video, and upload it to the web, they don’t need any media connections… it takes five seconds. Back then people could deny everything,” without video proof, he says.

Brown also notes it wasn’t just the smaller shops engaging in this behavior, as “you had the ‘boom boom room’ in Solomon Smith Barney,” a notorious basement below the trading floor which was the source of much litigation in later years.

The Clients, the Money and the Retail Broker

As the movie’s success grew, stories started emerging of clients who were ripped off by Belfort’s brokers, left with nothing in their retirement accounts. “You can’t care about your clients in that environment and actually thrive, you’re going to get fired,” Brown recalls. Based on the commission system in place at these brokerages, brokers were given bigger percentages the more money they made in each month, so they were incentivized to make more trades at the end of the month to hit the next commission percentage tier. This of course would be to the detriment of clients buying worthless stocks. The big money was too hard for the brokers to ignore; however, as the movie depicts the 300-foot yachts, Lamborghini Countaches, and pharmaceutical-grade quaaludes don’t grow on trees.

Present day “Wall Street,” according to Brown, is a totally different place. The retail brokerage has gone the way of the dodo, as the days of brokers cold-calling plumbers and electricians is over. These days most individuals are trading their own accounts using online brokers. The issue now according to Brown is that people are ‘blowing themselves up,’ meaning going bankrupt in the stock market on their own. “People are churning their own accounts, day in day out," he says. "They [investors] are their own wolves these days.”

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