Stronger Supervision of Brokers Proposed

The brokerage industry’s self-regulatory group on Thursday proposed rules to increase the supervision of brokers who have a history of customer complaints and to require securities firms to take action to address the accusations.

Firms with brokers who have three or more complaints in five years, three or more regulatory actions or two or more internal firm reviews involving wrongdoing would be required to adopt “heightened supervision plans” for them, said the NASD, formerly the National Assn. of Securities Dealers.

“Investors face a higher risk dealing with a broker who has a long regulatory record,” said Robert Glauber, NASD chief executive. “Securities firms must respond to that risk with enhanced controls.”

The NASD said a review of 663,000 registered brokers showed that within the last five years, 2,751 had three or more customer complaints and arbitrations, 216 faced three or more investigations and regulatory actions, and 1,198 had been terminated at least twice by their firms or had internal reviews based on charges of wrongdoing.