NASD SPOKESPERSON FINALLY SPELLS IT OUT:
YOU CAN'T TRUST RR'S TO PUSH FOR WALL STREET REFORM
By Bill Singer, bsinger@rrbdlaw.com
August 16, 2002
On August 1, 2002, On Wall Street magazine
published an article entitled: Attorney Seeks Broker Voice on NASD
Board. The column discussed several proposals I had made, among which
were that:
- NASD consider allowing some 700,000 registered persons
the right to vote on rule proposals involving their careers --- as of now
NASD solely offers voting to its member firms, some 5,500. I believe
that this process often favors employer over employee and management over
labor. I believe that registered persons will feel more involved in
the regulatory process if they have a voice.
- Forms U-4 be filed directly by the RR with CRD (full
copies to BD) and not through the member firm. No change at all would
be involved in supervision or any other rules and regulations. I
believe that RRs must have the ability to directly access their registration
and that this is an important step to ensure that such individuals are
viewed as professionals rather than mere salespersons. It is
the same process required of lawyers and doctors --- we do not file through
our employers. On a more basic level, each of us applies for our
driver's licenses directly with the Department of Motor Vehicles rather than
through our employer. There is simply no sensible justification as to
why the U-4 may only be submitted by the member firm --- it simply makes
life difficult for too many RRs, and at times with regulatory
consequences.
In response to those two proposals, On Wall Street noted
the following reaction from NASD:
In response to a request for comment, Tom Holloman, a
spokesman for NASD Regulation Inc., said: "Mr. Singer's agenda is clearly
out of step with the times, pandering to those who would seek less, not more
oversight and accountability. For example, Mr. Singer's proposal that
registered representatives vote on all regulatory changes governing their
behavior would almost certainly block or delay any effort to enact meaningful
reforms. We will resist proposals that would water down industry oversight."
Over the years I have had my dealings with
various NASD staff --- in fact, I used to be a Regional Attorney for the
SRO in New York City. Quite frankly, I've never met Mr. Tom Hollomon, but
one must wonder whether he fully appreciates his sensitive role as a
"spokesman" for NASD Regulation, Inc. It is comforting to
finally have in print the NASD's official assessment of the registered
representative community that it oversees:
To give individual RRs a vote is
to "certainly block or delay any effort to enact meaningful reforms"
and would "water down industry oversight."
As such, Mr. Holloman obviously assumes that RRs are not committed to effective
regulation and are incapable of acting professionally. What Mr. Hollomon
doesn't answer --- and actually raises in a provocative manner --- is why is it
appropriate to give NASD member firms the right to vote on the same
issues? Is it such a leap of faith to re-write the NASD's spokesman's
comment as follows:
"For example, Mr. Singer's proposal
that NASD member firms vote on all regulatory
changes governing their behavior would almost certainly block or delay any
effort to enact meaningful reforms. We will resist proposals that would water
down industry oversight."
Maybe Mr. Hollomon finally got it
right. You just can't trust Wall Street. You can't trust its
registered persons. You can't trust the firms. And, as I've been
saying for years, self-regulation may just not be workable in this day and
age. And if self-regulation can't rely upon the commonsense of its members
and their employees, then we ought to close down NASD and ship their oversight
back to the states and the SEC.
Ultimately Mr. Hollomon just doesn't trust
the registered community. Either you have confidence in the integrity of
the hundreds of thousands of men and women who make the member firms work, or
you don't. Mr. Hollomon also underscores my historic criticism of NASD
management, that they too often view the SRO as just another regulator and find
the whole concept of "self" regulation too cumbersome. Fact is,
Mr. Hollomon, the regulatory scheme in the United States includes a level of
self-regulatory organizations. If you will re-read the enabling
legislation in the Maloney Act you will see that the industry was considered a
valuable font of experience to promote more effective regulation. That
wealth of talent is not found in an entity but in the men and women of Wall
Street --- in human beings. You have simply turned the whole process on
its head. If giving the vote on certain regulatory matters to labor is
dangerous --- why isn't it the same concern for management? By the way,
Mr. Hollomon might want to refresh his recollection about NASD's
less-than-pristine history of industry oversight by reading the SEC's 21(a)
Report of August 1996. There are many of us who don't think all the
reforms enacted since then are meaningful.
Finally, on a personal note, I usually make a
point of trying to speak with someone before commenting on something they
said. Quite often things get lost in the mix. NASD spokespersons
might be well advised to do the same. For example, for several months I
have posted various versions of a Statement of Principles and Agenda for the
NASD dissident movement. I refer Mr. Hollomon to the following language in
point 7 of the Statement of Principles http://www.rrbdlaw.com/NASDELECT/agenda.htm:
[We] feel that Wall Street must maintain a
vigilant, effective, and uncompromised system of regulation. It is the
hallmark of the integrity of our markets. As painful as regulation may
be at times, it is a worthy cost to pay for the public's confidence.
However, NASD too often views its function as regulation "with
teeth," as NASD President Glauber recently stated. We insist that
there be a heart and a brain as well. . .
Block reforms? Water down
oversight? C'mon Mr. Hollomon, where are you getting that from?
Given Mr. Hollomon's comments, it is obvious that the SRO has already made up
its mind --- no discussion, no study --- typical! Of course we could settle this
dispute quite simply. I'll be happy to debate Mr. Hollomon on national
television concerning the issues. Why don't we call up CNBC or CNNfn and
arrange for some air time? |
