NASD to Make Brokers’ Records Available on Net
In a move certain to ruffle the securities industry, the head of the National Assn. of Securities Dealers’ new regulatory division said Friday that she plans to give investors direct access to stockbrokers’ disciplinary records via the Internet.
In an interview, Mary L. Schapiro also said she intends to make it easier to alert the NASD to rule violations by brokers and Nasdaq traders. She said the NASD will soon encourage and investigate complaints sent by electronic mail. Currently, it accepts only written complaints.
Schapiro, until recently chairwoman of the Commodity Futures Trading Commission, took over three weeks ago as president of the new NASD unit, called NASD Regulation. She said these steps are part of a larger plan to beef up the NASD’s enforcement efforts--which were criticized in an outside report commissioned by the NASD--and to give the public more information.
Investors deciding whether to do business with a broker can now get disciplinary information from the NASD only by calling a toll-free hotline. The hotline in recent years has been criticized by members of Congress and investors’ advocates for giving out only limited information--sometimes giving a clean bill of health to brokers with long records of customer complaints and pending arbitration cases brought by investors.
In January, however, the NASD announced an overhaul of the computer system that keeps track of brokers’ disciplinary records, and it said much more information will be given out over the hotline. Schapiro said she plans to go a step further, making the information available to anyone with access to the Internet.
Among those who should benefit, she said, are investors who receive calls from brokers at night or on weekends, when the telephone hotline is closed.
She also said she wants all disciplinary information in the NASD’s database to be available on the Internet.
“What we see, they will see,” she said.
More than a year ago, big Wall Street brokerage firms mounted a largely unsuccessful effort to limit the amount of information available to the public from brokers’ disciplinary records, contending that information such as unsubstantiated complaints from customers or settlements might unfairly damage brokers’ reputations.
Brokerage firm representatives interviewed Friday said they were unaware of Schapiro’s plan to give access to the records by the Internet, and several declined to comment. But the spokesman for one large firm, who spoke on condition that it not be identified, called the plan troubling and said executives are concerned that unfair allegations “could be just automatically disseminated.”
James D. Spellman, spokesman for the Securities Industry Assn., declined to comment on Schapiro’s plan but said that although the trade organization favors disclosure of valid information to investors, some information in the database “can unfairly jeopardize brokers’ reputations.”
Schapiro said her staff is studying the cost and logistics of putting the information on the Internet and does not know yet when it will be available.
The NASD is the parent of the Nasdaq Stock Market, which has been under investigation by the Justice Department’s antitrust division and the Securities and Exchange Commission for alleged practices unfair to small investors.
NASD Regulation was created in response to a report the NASD commissioned from a committee led by former Sen. Warren Rudman. The committee’s report, issued in September, called on the NASD to devote far more resources to enforcing its rules and to separate the NASD’s regulatory duties from the operation and promotion of Nasdaq.
