Securities Regulators Are Joining Forces
Tuesday, November 28, 2006SUSIE GHARIB: There's a big merger in the works tonight in the securities industry, but this time it's not the brokers who are joining forces. It's the regulators. The National Association of Securities Dealers and New York Stock Exchange regulation are consolidating. The new merged entity will regulate the NASDAQ and the New York Stock Exchanges, as well as all 5,100 brokerage firms around the country. Washington bureau chief Darren Gersh has more.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: With competition from international stock markets intensifying, regulators say it's a good time to streamline the way they do business.
RICHARD KETCHUM, CEO, NYSE REGULATION: U.S. investors deserve a regulator that has the resources and skills to keep pace with an increasingly complex and changing securities industry.
GERSH: Right now, the New York Stock Exchange polices itself and its members through a regulatory subsidiary. The National Association of Securities Dealers does much the same thing for NASDAQ and the nation's 650,000 stock brokers. The Securities and Exchange Commission oversees both groups and today played regulatory matchmaker.
CHRISTOPHER COX, SEC CHAIRMAN: Instead of a menagerie of potentially conflicting schemes that can actually undermine the effectiveness of regulation, not to mention the efficiency of our capital markets, we might soon be able to increase the effectiveness of regulation for the benefit of all investors.
GERSH: Investor advocates have long been concerned that industry self regulation is undermined by conflicts of interest. Rolling the New York Stock Exchange's regulation into the NASD will in theory eliminate those fears. But the question is what happens in practice.
DAMON SILVERS, GENERAL COUNSEL, AFL-CIO: There is nothing about what the SEC announced today that suggests that it is going to be toothless, but there are going to be people pushing for it to be toothless. And that's the danger. The danger is that a good idea will be turned into something that's not good by political pressure.
GERSH: Regulators say their goal is to make the rules more consistent and easier to follow, and that could ultimately save tens of millions of dollars. But the woman named to lead the new organization says there will be no cutbacks in regulatory staff.
MARY SCHAPIRO, CHAIRMAN & CEO, NASD: This is not about cost saving in terms of a staffing of the new organization. This is much more about cost saving within firms that are currently dealing with multiple rule books, multiple sets of examiners, multiple enforcement inquiries and cases.
GERSH: The new regulatory entity still doesn't have a name and assuming the SEC gives final approval, won't be up and running until the second half of the 2007. Once that happens, each member firm will get a $35,000 check as a sort of down payment on the expected regulatory cost savings. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
