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Robert
R. Glauber
September 9, 2002 Dear
Mr. Glauber, As
a member of the National Association of Securities Dealers, I would
like to express my displeasure regarding the regulatory efforts of
your organization. There
are currently many significant and high profile issues that need to
be addressed by your organization, as these issues are significantly
impacting the public’s desire to invest in products you regulate.
The following are just a few of the issues that should be addressed
by your organization:
To say that the public perception of the brokerage profession is sliding would be a very large understatement. In the publics eye the industry is downright slimy, and from where I sit, a good amount of this is justified. I think we can all agree, that what your organization does to correct these issues in the next several years will have a major impact on the future in traded securities for a long time to come. How
can the NASD NOT be focused on researching and rectifying the above
issues?
Instead, what I see happening is an emphasis on rounding up
the usual suspects and finding infractions, however small, and getting
the numbers up for fines. But
yet the real issues (that can potentially impact the entire industry)
and the larger more connected firms are apparently avoided.
And yes, I do believe that regulatory efforts should be
concentrated in the larger firms where these conflicts lie. PTI Securities is a small firm that does not do investment banking, does not produce research, does not trade against customer orders, has no securities proprietary trading, does not except payment for order flow, and has less than 5% of our revenue even generated by commission brokers (and of those two semi retired brokers which are paid commissions, they only have accounts of friends and family). We do our very best to avoid any potential conflict and maintain that the best execution for our clients and the highest amount of risk management are our only concerns. Recently
PTI Securities underwent a MSRB audit that probably involved over
100 hours of your District 8 office’s time.
At the time of the audit, PTI Securities had not done one MSRB
transaction, not one. And
yet, even after being notified of this fact, the audit proceeded.
Right there, I have a real problem with the allocation of your
assets given the environment we are now in.
During the time spent reviewing reams of information, searching
for a regulatory problem in municipal bond transactions that never
occurred, your people determined that $500 dollars in commission was
paid to a broker for non MSRB transactions.
PTI was fined $5,000, approximately 10X the amount of the total
commissions involved, due to the fact that there was a brief gap between
the day the broker’s continuing education was due and the actual test
date. This fine was levied
even though every payment to this broker and arguably every trade
for which commission was paid, was done after the continuing education
was scheduled (with the delay being caused by your sub-contracting
test facility). Even
if a fine was justified, the amount is totally excessive given the
dollars involved. The
explanation given by the NASD was, PTI was a repeat offender because
there was a previous incident.
Previously, PTI had depended upon your website to provide
us with information regarding when tests were due. Upon checking your site, we found that no tests were due by
any PTI brokers. We produced
copies of those web pages for your auditors, and yet PTI was cautioned
because we depended upon the “wrong” part of your website. This same problem obviously effected many firms, for you have
since changed your system to notify firms directly on tests due.
But PTI was still wrong.
A stand up organization, especially a member organization,
would probably have apologized to the brokerage firms for the hassle
and the inaccurate information that we depended upon, but instead
we are basically indicted. The
real question that needs to be addressed at this point is, What
exactly is the NASD attempting to accomplish?
Is the NASD’s mission to make the world safe for investors,
or is it to justify their existence by getting their enforcements
up without ruffling the wrong feathers. Respectfully, cc: Rep.
Rod R. Blagojevich Senator
Christopher J. Dodd Senator
Richard J. Durbin Rep.
Michael Oxley Mr.
Harvey Pitt Carla
Romano Senator
Paul S. Sarbanes |
| What are YOUR thoughts on this hot topic? We would love to hear if you agree with Dan Haugh or if you have some ideas of your own on how to tackle this problem. Send your feedback to: Sarah@PTISecurities.com |