December 27, 2004
I think the current system if it can be called that is broken, at best and criminal, at worst. I fully agree with the following comments: I am calling for the abolition of all SROs and for the creation of a national private sector regulatory organization NPSRO. The NPSRO would be managed by a Board filled with representatives from the ranks of public investors, public issuers, securities industry entities, and securities industry personnel. The disengagement of the regulator from the present geography of NASD, NYSE, etc. will hopefully eradicate the internecine warfare that still exists among the various regulators when it comes to protecting their own turf and what in some quarters is still viewed as the turf of their exchange or trading venue. Moreover, the NPSRO would be funded not just by the brokerage community but by all participants in the process through a fee on all trades in the covered market and appropriate annual renewal fees for processing registrations. Fines collected by the NSPRO should be set aside into a fund for the benefit of defrauded public investors and payments made upon proof that awards are uncollectible. There must be some emphasis on maintaining workable ratios of industry-experienced regulators to inexperienced or less experienced regulators in order to ensure maximum competency in executing the regulatory mandate. Finally, there must be a far greater emphasis on developing a cadre of regulators dedicated to problem solving and working with the industry, rather than the present system that seems largely focused on punishment rather than meaningful education. As an independent General Securities principal formerly employed by Edward Jones, I have seen the result of the current system and it is appalling. I only hope these recommended changes would occur in my lifetime. The current B/Ds are the wolves who own the henhouse and who pay the guards/SROs to look the other way. The level of so called fines are pitiful considering the crimes committed by the firms. One large wirehouse was fined 400M for stealing 1B from its clients. I would take that deal any day. It must change or it will soon meltdown and collapse under the weight of its own malfeasance.