Future NASD Chief Reassures Industry
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Monday, March 27, 2006

Future NASD Chief Reassures Industry

The NASD wants to work with financial firms towards mutually acceptable terms, the organization's future CEO has suggested.

In a speech delivered one week ago at the annual conference of the Securities Industry Association's compliance and legal division, NASD vice president Mary Schapiro said she is "committed to viewing the regulatory landscape with the input of not just my colleagues at NASD, but from the eyes and vantage point of those from inside the industry."

NASD has heard considerable negative feedback on the growth of regulations, said Schapiro, and does not dismiss it. "The key for us is to pay attention to what is being said and not to discount the rebounding criticism of the moment as necessarily self-interested, uninformed or irrelevant -- we need to learn what is useful from the criticism and apply that in our work," she said.

Schapiro, who will take over from Bob Glauber as chairman and CEO of NASD later this year, responded specifically to the SIA's recent report on the costs and burdens of compliance.

"NASD is not an enemy of efficiency," she said, pointing out that the organization is using technology to make its examination system more productive, and coordinating its sweep efforts across firms.

Schapiro said the SEC requested a joint report from NASD and the NYSE on the operation and effectiveness of research analyst conflict of interest rules. "Included in this report are recommendations we developed that in many cases argue for the relaxation of certain restrictions," she said. "And we have made these recommendations notwithstanding that it may mean in certain instances urging the SEC to grant an exemption from applicable provisions of Sarbanes-Oxley."

As examples, Schapiro cited proposals that the SEC permit web-based disclosure of conflicts of interest, instead of requiring publication in the research report itself, and that it exclude mutual fund and direct participation program sales material from the definition of "research report," since NASD already has stipulations governing such communications. She also explained that NASD favors the elimination of quiet periods before and after the expiration, termination, or waiver of a lock-up agreement, and believes a limited exemption from registration requirements should be granted to "research reports" produced by individuals who are not primarily researchers.

NASD's forward-looking task force, "Ahead of the Curve," tries to avoid compounding the set of regulations already in place, said Schapiro. "Seldom is the outcome rulemaking or enforcement," she maintained. "We don't preclude those as an action plan, but it truly is the last place to which we jump."

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