WealthManagement Magazine

Schapiro in for Glauber at NASD 2007

The NASD Board of Governors announced today that Mary Schapiro, currently the self-regulator’s head of Regulatory Policy and Oversight, will become the NASD’s chairwoman when the term of its current chief, Robert Glauber, ends in December 2006.

The NASD Board of Governors announced today that Mary Schapiro, currently the self-regulator’s head of Regulatory Policy and Oversight, will become the NASD’s chairwoman when the term of its current chief, Robert Glauber, ends in December 2006.

“In announcing Schapiro’s election now, the Board of Governors is acting to ensure a smooth handover in NASD’s leadership as Bob Glauber prepares to step down late this year at the end of his current term,” said Richard Brueckner, CEO of Pershing and presiding governor of the NASD Board of Governors, in a statement.

Glauber came to the NASD at a tumultuous time for the industry, the nation and the world, joining the self-regulatory organization before the bull market peaked in 2000 and ascending to the chairman position in September 2001. Just two years into his tenure, Eliot Spitzer uncovered widespread conflicts of interest and fraud on the doorstep of the NASD, at mutual fund firms and NASD member firms.

Since that time, many would say the NASD has been on a regulatory (or disciplinary) tear. Glauber had this to say in an internal memo to NASD colleagues: “Since I came to the NASD in November 2000, much has changed. In just five years, we have emerged a much stronger organization—united in focus, singular in purpose—known first and foremost for being a tough, no-nonsense regulator.”

Few in the brokerage industry would disagree. And according to NASD statistics, while “new disciplinary actions filed” have remained level at around 1,400 since 2003, the “disciplinary fines collected” from those actions have quadrupled from $33 million to $125 million. Some say the organization lost much of its educational and informational role in the past few years, preferring to fine and suspend instead of educate and warn members. “To a large extent, minor rule violations are more apt to turn into a formal matter with formal charges. There’s been less understanding that people sometimes make mistakes,” says Aegis Frumento, a securities litigator with Duane Morris in New York. How much of the regulatory madness should be pinned on Glauber? “The fact of the matter is he was in there at a very aggressive time at the NASD, the SEC also—it’s a bigger issue than just one person in one position.”

Still, as chairman, others say he’s in charge. And much of the criticism from the industry has been that the self-regulator has become more of a schoolyard bully than a guidance counselor to member firms. Small firms (those with less than 150 reps), which are 60 percent to 70 percent of the membership, say the organization’s propensity to focus less on investor protection-related rule violations and more on technicalities is crippling their businesses and, in many cases, closing them down. “A $10,000 fine for Merrill Lynch is the cost of jet fuel for one of their executive’s planes,” says one small broker/dealer owner who wished to remain anonymous. Indeed, according to the NASD statistics, the number of member firms has fallen by 248, from 5,392 in 2002 to 5,144 in 2005.

While the industry may have needed a dose of heavier regulation, some say Glauber did a poor job of communicating with and listening to the ones he was regulating. “The industry will always be resistant to regulation, but that’s why you need someone who can listen and communicate with the ones being regulated,” says Bill Singer, a New York securities lawyer and columnist for Registered Rep. Singer says Mary Schapiro has those ambassador-like abilities and is the right person for the job. “As my grandmother used to say ‘You were given two ears and one mouth so you can listen more and talk less,’ that’s Mary,” he says.

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