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Our mission was to build a research effort that was value-add. We would find and bring quality ideas to institutional investors in the emerging-growth sector and then we would also finance those companies.

We were not just identifying technology companies. We were trying to find growth companies wherever they were. I remember the mobile home sector was a hot sector back then. The restaurant sector, particularly Ponderosa Systems, was one of our big companies. Our activity was in a number of industries. We were involved both inside and outside the technology area, although technology was clearly one of the leading industries. Oil service was another area that was very prominent back then.

Eventually, a competitor firm started. It was the only other company out there competing with us.

Montgomery Securities In 1978, we had a split. Kenny Seibel left to start his own money management firm and Bob Coleman and Sandy Robertson decided to move on and start their own businesses. So the firm changed from the four names to Montgomery Securities and continued on its path.

The ERISA Act helped fuel the gains that we saw over the next twenty years. I think the biggest regulatory act was the SEC mandate in the mid-1970s to replace fixed with negotiated commissions. It was May of 1975 and it was a major event for the capital markets. The SEC took the industry off fixed rates. Generally, even for larger orders such as 100,000, the average commission was thirty-five cents. After the change, it immediately went to eight cents. There were many research boutiques that existed before May of 1975 that went out of business within a year.

This mandate was probably the major event that we had to prepare for. We had to build a trading activity that would allow us to compete from a trading standpoint as well as from a research standpoint. The firms that had only research, like we used to, were given pretty easy orders but not a block trading capability. We needed to build in block trading capability, so in late 1974 I brought in a gentleman who had been running the Lehman Brothers trading operation. We needed to bring in more traders and more sales people, which necessitated building out the partnership. The only thing we had to give people was equity because we were a small, young firm. This was a major issue for some of the senior partners since it meant we needed to dilute equity to bring in new people.

The mandate was a major event for the industry and a major inflection point for our firm. We survived that period. The country went through a very deep recession in 1973 and 1974, so this mandate came on the heels of a very difficult economic environment and a very rough capital markets environment. I think that for a couple of years there was literally no equity issuance, particularly for younger companies. Our firm really needed to survive on the institutional brokerage business that we had created, and building out a major league trading operation was really critical.


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