Those of you familiar with my published columns, websites, and law practice know that I have been an outspoken and ardent advocate for the rights of individual registered reps and independent/regional broker-dealers for many years. Over a decade ago I helped found the NASD Dissident movement and have remained a staunch supporter of regulatory reform. As such, rather than restate all my beliefs and opinions about self-regulation, I will merely refer you to the results of whatever GOOGLE search you might undertake on that issue.
For now, I prefer to be brief and to the point.
The NASD membership is being asked to vote in favor of a proposed merger of the regulatory arms of the NASD and the NYSE. Except . . . those self-regulatory organizations (SROs) say it's not really a merger but a consolidation. Whatever. The proposal submitted to a vote by NASD members asks for the approval of whatever combination is contemplated.
I say those voting should vote NO.
First, I detest bureaucratic paternalism and this deal has been fathered by just such arrogance. The staffs of the NASD, NYSE, and the Securities and Exchange Commission (SEC) apparently got together and cobbled together the mess that is now on the table. I see little evidence that those of us in the industry with the historical credentials of dissidents or reformists had any input. To the contrary, the same, tired, old melange of cronies and sycophants sat down at the same exclusive table where their seats have been reserved for years and chiseled into stone the deal they now seek to foist upon an unwary industry.
The clash of ideas may be the fuel of our capitalist marketplace, but when it comes to regulation there is apparently no room for dispute or disagreement --- which might explain why today's Wall Street regulators are largely impotent, clueless, and forever trying to catch a runaway train of fraud.
Second, the deal is a bum's rush. Anytime anyone tells me that something has been done for my benefit but I must immediately sign on the dotted line --- I usually look over my shoulder to see if there is a hand in my back pocket. It takes the SEC nearly a year to consider industry appeals of SRO decisions. It takes the SROs in excess of a year to investigate and eventually charge most violations. Brokerage firms can rarely get an approval to open as new entities in under six months. But --- gee --- the NASD, NYSE, and SEC seem to think that this dramatic replanting of Wall Street's regulatory landscape only requires a few weeks during the holiday season. Yeah, right --- like there's nothing fishy going on here.
No, I'm sorry, but if this is such a great deal, then why weren't the proposed terms first submitted to the industry for at least a 90-day period of discussion and debate? Do any of you know of any historic new rules or regulations that were simply drafted and approved without meaningful discussion? Is it likely that career regulators crafted a new SRO that addressed many of your pressing business needs?
If for no other reason, you should vote against the proposed merger as a protest against the arrogance of regulators who do not respect your intelligence and think they know what's best for you.
Remember the last time you contacted the NASD and needed a quick response? Remember the reply? Put it in writing. Leave a message at the beep. We don't give legal advice. We can't approve this without a supervisor's okay. Washington is afraid that if they okay your request, they would have to do it for everyone. Sorry, we lost your paperwork.
So . . . maybe you can repay all those years of indifference and delay with a nice fillip of your own. Your "no" vote will frustrate the regulators and give them a taste of their own dilatory medicine. What a delicious turnabout-is-fairplay! Something they want so desperately and you get to say: "not right now." Let them stew in their own juices for a change. Maybe they will learn some useful lessons!
Three, as was most sagely stated in the Bible, you don't put new wine into old wineskins. Frankly, that's all we have before us. Tired and failed solutions to ongoing, persistent problems. Cosmetic changes to broken institutions. A blatant, naked effort to grab any power from the overwhelming majority of NASD members and dilute it under the guise of "guaranteeing" three seats on a new Board. You can't be that stupid not to see past the subterfuge --- but, of course, they are counting on just that fact.
In conclusion, I favor the creation of a new, unified, private-sector regulator. I believe we need to build a consensus within the investment and investor communities and use that platform to build a workable alternative to the failed policing we now have. Sadly, I would have loved to have sat down with my traditional colleagues and adversaries at the SEC, NYSE, and NASD and shared my thoughts and concerns. I offered. Many folks in the dissident and reform movement offered. There were hints that someone would get back to us. My email in-box shows no such proof. My voicemail is absent of any message. I wait, in good faith, but am told to drop dead. They've been telling me that for over a decade. I'm still here breathing.