Brokerages Decry Plan for Regulatory Oversight

From Bloomberg News

A.G. Edwards Inc. and more than 20 other brokerages say a regulatory plan to bolster supervision of stockbrokers is cumbersome, expensive and may force some of them to shut offices outside major U.S. cities.

The new rules proposed by the New York Stock Exchange and the NASD (formerly the National Assn. of Securities Dealers) would require firms to have an independent inspector examine how brokers safeguard customer securities, keep records of transactions and handle customer funds.

American Express Financial Advisors Inc., AIG Advisor Group Inc. and Axa Advisors, in letters to regulators, have joined A.G. Edwards in saying the plan isn’t worth the price tag and won’t be more effective in deterring broker theft than oversight systems now in place.

AIG and Axa also said the plan puts their small-town offices in financial jeopardy.


“Our one-man, one-woman offices do well in those communities,” said Susanne Denby, an AIG compliance director. “If we have to pull out of those areas, clients would have to drive 100 miles to see a broker.”

Investor advocates said that even if added oversight raises brokerage costs, it would be worth it to ensure that brokers are supervised properly.

“As an investor, I don’t mind paying 2 to 3 extra cents on every trade to ensure someone who is independent is looking over the shoulder of my broker,” said Mark Maddox, a lawyer who represents investors in disputes with the securities industry.