The SEC is looking for last-minute information from brokerage firms in making its determination on the controversial qualified immunity rule.
Last fall, the agency asked the NASD to supply more information justifying the need for the rule, which was pending SEC approval at press time in early December. The rule would supersede state law and create a generally tougher legal standard for arbitrating defamation claims that arise from statements made on U-4 and U-5 forms. The industry claims that more protection is needed to ensure full disclosure, while brokers have expressed concern that the rule would erode their rights.
The NASD responded to the SEC's request for more information by asking the Securities Industry Association (SIA) for anecdotal cases of firms beingsued for defamation. The SIA says it did provide some information, but neither t he NASD nor the SEC would disclose that information to RR.
Meanwhile, broker groups and the NASD are telling two different stories about how much input brokers had in creating the rule proposal.
At an NASDR compliance conference in November, John Ramsay, NASDR deputy general counsel said: "Through this entire process we have asked reps as well as firms ... exactly what the problems were in trying to craft a solution. And we tried to be very fair and balanced about it."
But T. Sheridan O'Keefe, president of the National Association of Investment Professionals (NAIP) in St. Paul, Minn., says, "We have never been ... asked our opinion by the NASD either by telephone or by letter." O'Keefe wrote the NASD in July 1997 asking that the NAIP be included in the NASD's committee that drafted the rule. He says he got no response.
(The editor in chief of RR is a board member of the NAIP.)
Other employee groups also say they were not contacted by the NASD, including the Financial Women's Association of New York, the New York Society of Securities Analysts and the Security Traders Association. The National Association of Securities Professionals, a group representing women and minorities, did not return calls.
The NASD would not confirm if it has contacted reps on an individual basis. The NAIP, as well as individual brokers, did send unsolicited comment letters to the NASD and SEC regarding the rule.
The idea for a uniform, enhanced level of immunity was first floated by the industry in 1994 after the SEC conducted a "rogue broker" sweep of major firms. The sweep uncovered widespread failure to disclose problem brokers.