SEC, NYSE and NASD Issue Joint Statement on Broker-Dealer Risk Management Practices

The examination staffs of
the Securities and Exchange Commission, the New York Stock
Exchange, and NASD Regulation, Inc. today issued a joint
statement on broker-dealer risk management practices.  The
statement provides examples of material weaknesses in the
policies and practices employed by certain broker-dealers to
manage risk and examples of sound practices that were noted
during on-site examinations of broker-dealers’ risk management
practices conducted over the past several years.

     The “Broker-Dealer Risk Management Practices Joint
Statement” reemphasizes to management throughout the broker-
dealer community the importance of maintaining an appropriate
risk management system geared to a firm’s business activities.
Additionally, in recognition of the increased importance of this
function, the examination staffs of the SEC, NYSE and NASDR
stated that they will increase their emphasis on the review of
risk management controls during regulatory examinations.

     Lori Richards, Director of SEC’s Office of Compliance
Inspections and Examinations, said, “We urge all broker-dealers
to read the Joint Statement and reexamine their own internal
controls practices and procedures.  As firms grow and change,
they must ensure that their risk management programs keep pace.
Experience shows the benefits of sound internal controls.”

     Edward Kwalwasser, NYSE Group Executive Vice President in
Charge of Regulation, said, “Given the complexity of our business
and proliferation of new products, it is imperative that risk
controls are in place and managed at the highest level of the
organization and that they are constantly re-examined to keep
pace with the firm’s business.”

     Elisse Walter, Chief Operating Officer of NASD Regulation,
said, “Risk management procedures implemented by member firms are
critical to the protection of investors and the integrity of the
market.  I am pleased with the collaborative effort of the NASD,
SEC and NYSE task force and am confident that the recommendations
outlined in the joint statement will be helpful to senior
management in the securities industry.”

     Text of the Joint Statement is available on the SEC website
at:  <www.sec.gov>.

[WEBMASTER NOTE: The complete URL is

http://www.sec.gov/news/studies/bdriskp.htm

A link can be found on the Special Studies page,
under SEC Digests and Statements. ]