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EF Hutton is an American stock brokerage firm founded in 1904 by Edward Francis Hutton and his brother, Franklyn Laws Hutton. Later, it was led by well known Wall Street trader Gerald M. Loeb. Under their leadership, EF Hutton became one of the most respected financial firms in the United States and for several decades was the second largest brokerage firm in the country. The firm was best known for its colorful TV commercials in the 1970s and 1980s based on the phrase, "When E. F. Hutton talks, people listen," which usually involved a young professional remarking at a dinner party that his broker was EF Hutton, which caused the moderately loud party to stop all conversation to listen to him.

EF Hutton
Industry Financial services
Founded 1904 (original firm; acquired by Shearson Lehman Brothers in 1988 to form Shearson Lehman Hutton)
2012 (revived as EF Hutton America, Inc.)
Founder Edward Francis Hutton
Headquarters Springfield, Ohio
Key people
Gerald M. Loeb
(Former Chairman),
Peter V. Ueberroth
(Former Director)
Robert M. Fomon
(former Chairman & CEO),
Christopher Daniels
(Current President and CEO)
Website www.efhutton.com

Contents

HistoryEdit

E.F. Hutton & Co. was founded in San Francisco in 1904 by namesake Edward Francis Hutton and his brother, Franklyn Laws Hutton. EF Hutton was one of the first brokerages to open offices in California. In 1906, two years after the firm was founded, its offices were destroyed in the San Francisco earthquake of 1906. In 1924, famed Wall Street trader Gerald M. Loeb joined the firm, ultimately rising to chairman. The firm developed a nationwide retail brokerage network to market its debt and equity securities. It also operated seasonal offices in Palm Beach, Florida (winter) and Saratoga Springs, New York (summer) to cater to its customers. Morrie Cohen opened Hutton's first one-man office on Maui in December 1969.

Hutton, an entrepreneur who later also became chairman of the General Foods Corporation and for years wrote a newspaper column, led the firm until his death in 1962. In 1970, Robert M. Fomon was appointed Hutton's Chief Executive Officer.[1] Despite the failure or takeover of many of its peers in the 1960s and 1970s, Hutton retained its independence under Fomon's leadership. By the early 1980s, the original E.F. Hutton & Co. had become the principal component of what grew into a group of companies owned by E.F. Hutton Group Inc., listed on the New York Stock Exchange.[2] Other subsidiaries of that Delaware-chartered holding company were E.F. Hutton Trust Company (now "Smith Barney Corporate Trust Company" and owned by Citigroup), E.F. Hutton Life Insurance Company, and E.F. Hutton Bank. The Hutton companies also managed many mutual funds and other investment vehicles, some of which were separately incorporated and/or registered, and participated actively in corporate mergers and public offerings of securities. In 1976, Western Union partnered with E. F. Hutton & Co.

Malfeasance and mergersEdit

In the 1980s, Hutton was caught up in a number of difficulties that ultimately led the firm to seek a buyer. Hutton's most serious trouble came from a check kiting scandal that was uncovered in 1985. Hutton branches were writing checks against accounts at various regional banks and then funding those accounts with checks from yet other banks. This strategy, known as "chaining," gave Hutton the use of money in both accounts until the checks cleared. In effect, Hutton was giving itself a free loan that also did not carry any interest.[3][4] In early 1987, an internal Hutton probe revealed that brokers at an office in Providence, Rhode Island, laundered money for the Patriarca crime family. Although Hutton reported the investigation to the SEC, it was not enough to stop prosecutors from all but announcing that Hutton would be indicted.[5] This last scandal was uncovered only a week before the 1987 stock market crash. By the end of November 1987, Hutton had lost $76 million, largely due to massive trading losses and margin calls that its customers could not meet.

On December 3, 1987, Hutton agreed to a merger with Shearson Lehman in a $1 billion ($2,154,071,470 today) deal. The merger took effect in 1988, and the merged firm was named Shearson Lehman Hutton, Inc.[6]

Following the merger, dozens of Hutton brokers left the firm to join competitors. At the same time, the combined firm suffered dwindling business from individual investors as its focus was shifted to large corporate transactions.[7] The Hutton brand was used until 1990, when American Express abandoned the name and the business was renamed Shearson Lehman Brothers. Joe Plumeri became the President & Managing Partner of Shearson Lehman Brothers in 1990.[8][9]

In 1992, Shearson sold The Boston Company, an asset management group, to Mellon Financial. In December 1988, the Boston Company had disclosed that it had overreported its earnings by $30 million.

In 1993, American Express sold its brokerage and asset management business—the Shearson and Hutton parts of Shearson Lehman Hutton—to Primerica. Primerica merged them with Smith Barney (which it had bought in 1987) to form Smith Barney Shearson, later shortened back to simply Smith Barney. As a result of several mergers throughout the 1990s, the remains of the original E.F. Hutton became part of Citigroup, and later Morgan Stanley Wealth Management, a joint venture between Morgan Stanley and Citigroup.

RevivalEdit

As a result of the Subprime mortgage crisis, Citigroup was forced to sell assets and a group of E.F. Hutton alumni bought the E.F. Hutton brand for an undisclosed amount.[10]

The E.F. Hutton brand was revived in 2007 by EFH Group and went public in 2013. EFH Group changed the brands stylization from E.F. Hutton to EF Hutton. In 2014, EFH Group was acquired by Twentyfour/seven Ventures, Inc. and renamed EF Hutton America, Inc. and is currently led by CEO and Co-Chairman Christopher Daniels and Chairman Stanley Hutton Rumbough, the grandson of Edward Francis Hutton.[11] In 2016, the new EF Hutton moved its headquarters from New York City to Springfield, Ohio.[12]

ReferencesEdit

  1. ^ Robert Fomon at Hutton September 30, 1985 The Miami News
  2. ^ Douglas Frantz (September 8, 1985). "How E.f. Hutton Scandal Unfolded". Chicago Tribune. 
  3. ^ "Placing the Blame At E.F. Hutton". Time. September 16, 1985. Retrieved May 1, 2010. 
  4. ^ Nash, Nathaniel C. (1985-05-03). "E.F. Hutton guilty in bank fraud: penalties could top $10 million". New York Times. 
  5. ^ Halloran, Richard (2007-10-11). "U.S. Hints at Hutton Indictment in Money Scheme". New York Times. 
  6. ^ *Shearson Reported To Acquire Hutton In a $1 Billion Deal. New York Times, December 3, 1987
  7. ^ Vanities on The Bonfire: Peter Cohen. Time, February 12, 1990
  8. ^ "Joseph J. Plumeri Profile". Forbes. Retrieved July 15, 2010. 
  9. ^ Bianco, Anthony (March 30, 1998). "Joe Plumeri: The Apostle of Life Insurance". Business Week. Retrieved July 15, 2010. 
  10. ^ E.F. Hutton, the sequel: Will it play? Apr 23, 2012 Investment News
  11. ^ E.F. Hutton Speaks Up, Again March 18, 2015 Wealth Management
  12. ^ "Company Overview of HUTN, Inc". Bloomberg.com. 

Further readingEdit

External linksEdit

Vintage TV commercial from the late 1970s When E.F. Hutton talks, people listen