SIA Calls NASD Proposal Unfair

CRD Complaints issue remains a sticking point for brokerage industry.

The Securities Industry Association has weighed in negatively on the NASD’s proposed changes to the handling of central registration depository (CRD) complaints.

In a statement released Monday, the SIA says the proposed modifications do not "strike a fair balance between the important disclosure interests and fundamental fairness." The statement took the form of a letter from SIA senior vice president Stuart Kaswell to Jonathan Katz, secretary at the Securities and Exchange Committee.

SIA’s main point of argument is a proposed NASD bylaw that would require confirmation from a court to expunge customer disputes from brokers’ permanent CRDs. As noted in a previous Rep. article there are other prickly issues with the NASD proposal. Specifically, the move to set up an e-mail service for alerting interested parties to the arrival in the CRD of new complaint does not sit well with brokers. The worry is that unfounded or minor complaints would get more play than they deserve. Further, there is a feeling that the brokerage community’s concerns about the fairness of the proposal is taking a back seat to the NASD’s need to look tough on corruption.

For its part, the SIA generally supports the NASD proposal, but it takes issue with the way complaints are disclosed, saying, "it is our understanding that neither doctors, lawyers, nor any other body of professionals are subject to a national system of public disclosure that reports even the flimsiest unproven allegation." It also warns against potential misuse and claims the proposal would cause the CRD database "to be filled with inaccuracies and potentially misleading information."

The NASD proposal remains in its comment stage, and some observers suspect it will not be activated until Congress passes legislation—currently under debate—that makes the NASD immune from potential lawsuits springing from the proposal. The NASD had no comment at press time.

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