Tribal representatives from across North America visited New York to watch NativeOne representatives ring the NYSE closing bell on August 25, 2011 in celebration of the broker-dealer officially becoming the first American Indian-owned member of the NYSE. (Courtesy of NativeOne)

Native Broker-Dealer Helps Tribal Education

Mark Fogarty
2/22/12

A Native-owned broker-dealer in New York’s financial district has scored another innovation—“a way,” one of its founders said, “to keep a perpetual flow of money into educational funds for tribal children.”

Dennis Smith, cofounder and managing member of NativeOne Institutional Trading, calls the simple concept Giving Back. “It’s a legal way to do it,” he said. “We donate back 10 percent of our profits for an educational fund [for the investing tribe].”

The program is unusual for Indian country and “unique to a lot of people who don’t know you can do this,” said Smith, whose Wall Street experience dates back to the 1970s, when he joined Merrill Lynch.

In 2009, Smith cofounded NativeOne with Don Lyons, a member of the Morongo Band of Mission Indians in California. The Morongo tribe is also the first nation to take out an equity position, i.e. to buy an ownership stake, in NativeOne.

Smith, while not an enrolled member of a tribe, said he has Lenape heritage through his great grandmother.

“Very, very few tribes have the expertise to manage their money,” Smith said. “They use money managers.” Some tribes use multiple money managers, each with a different investment philosophy for valuable diversity.

“Some tribes have a lot of money to invest,” said Smith, citing successful gaming tribes.

The money managers, in buying and selling stocks, cannot make the trades themselves and “must go through a broker-dealer,” Smith said. NativeOne, as a broker-dealer, can buy and sell stocks, bonds, options or government securities for these tribal money managers, if the tribal chief financial officer directs them to do so.

The difference for tribes who use NativeOne to buy and sell investments is that 10 percent of the group’s profits on their earnings go to benefit tribal children. Smith said that his firm’s fees are also often “thinner”—that is, less expensive—than those of other broker-dealers.

To Smith’s knowledge, no other broker-dealers offer rebates in this fashion. In any event, he said, “This format works very well. A $1 billion fund can generate $2 million in fees and commissions [annually]—it can become substantial.”

The managing member wants Giving Back to become a multimillion-dollar program over the years. Meanwhile, he said, “You have to start out slow.”

For instance, the first quarterly rebate to the Oneida Tribe of Wisconsin, the first tribe to sign up for the program, was just $69.52. But the second was $129.76. Both rebates have been placed in the Oneida Higher Education Trust.

Susan White, director of the Oneida Trust, told Indian Country Today Media Network that it was too early to determine trends. But she added, “I am impressed with NativeOne’s commitment to provide internships in the trading industry to Native Americans and that NativeOne provides rebates to tribes to be used at the tribe’s own discretion. These two objectives are greatly needed throughout Indian country.”

A second tribe, which Smith declined to name, has also signed up, with several more in negotiations. Another tribe wants to use the rebate money for seniors rather than for children. And that's just fine with him. “The tribe can dedicate it to anything they want,” he said.

And even non-Native corporations can take part in the program, Smith noted. NativeOne has already made proposals to 35 Fortune 500 firms that have indicated they want to do business with minority-owned firms.
As a potential example, he pointed to the California state worker pension fund, CalPERS, which has signed on as a NativeOne institutional client. In this case, an educational fund to benefit the children of all California tribes would be started with rebate money.

Besides CalPERS, “We circled in on ones that have minority preference,” like 3M, Nike, Pepsico, Time Warner, or  Lockheed Martin. “It’s a great way for them to get free advertising in Indian country,” he said.

The idea for the Giving Back program surfaced through meetings with Navajo Code Talker Keith Little, who recently passed away. Little has been trying to raise money through public donations for a Code Talkers Museum, and NativeOne has been trying to help with that.

“The Code Talker idea traveled into the educational funds,” Smith said.

On Aug. 25, 2011, NativeOne Institutional Trading became the first Native-owned member of the New York Stock Exchange. The firm is a unit of NativeOne Financial Holdings, which has several other businesses. NativeOne has 12 employees and offices in New York City and New Jersey.

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