Speaking at the second annual NYSE Regulation conference in New York, NYSE Group CEO John Thain took on what he called “excessive” regulation as being one of the factors responsible for driving capital-raising activity outside the U.S.
Twenty-three of the 25 largest initial public offerings that took place in 2005 were not registered in the U.S., Thain said, and so far this year, nine out of 10 have not been registered in the U.S. “The fact is, we’re making the U.S. unattractive for foreign firms looking to raise capital,” he said. Thain also attacked Sarbanes-Oxley, a litigious tort system and confusing accounting standards for discouraging foreign businesses from seeking financing in the U.S.
Thain was nevertheless supportive of regulation in general. He emphasized its importance in maintaining “the trust and confidence” of investors. He applauded NYSE Regulation CEO Richard Ketchum, as well as the rest of the NYSE Regulation staff for their efforts to streamline regulation and work together with the NASD to curb duplicative efforts.
This more-positive tone was in keeping with other remarks made during the day. Senior Regulation staff talked about efforts to improve relations with the NASD, discussed efforts to improve education and communication with members and investors and offered guidance on upcoming initiatives.
Ketchum kicked things off with a short speech in the morning, then played moderator to his fellow senior staff members, asking each one a number of prepared questions. Grace Vogel, head of member firm regulation, outlined for the hundreds of attendees some of what Regulation was focusing on, including: relationships of member firms with hedge funds; sales of hedge funds to retail customers; nonmanaged fee-based accounts; new products and the extent of disclosure given to customers about them, as well as the training given to the reps selling them; new investment advisor rules; and internal control rules.
Susan Merrill, head of enforcement, talked at length about risk. “We’re trying to take a more risk-informed approach to preliminary investigations,” she said, which means the type and size of a firm, the number of customer complaints it has, it’s regulatory history and any significant matters reported since its last examination will be considered before any exam.
She also made light of the fact that NYSE Regulation now employs a full-time risk analyst who digs through member filings in search of potential risks and trends. In addition, enforcement attorneys and investigators have at their disposal a “very powerful tool” called STAR Matrix, says Merrill, a proprietary software application that allows investigators to search all regulatory information by rep, product or firm to help spot risks and trends.
That said, Merrill says NYSE Regulation is making an effort to get to know members better in the hopes of opening lines of communication. “We’re trying to meet with business people at member organizations,” she says, not just legal and compliance teams. Robert Marchman, head of market surveillance, also reminded member firms of “Ask Market Surveillance,” the online help tool for members who may be confused about rules, wish to retrieve educational bulletins or hearing panel decisions or simply wish to ask the staff a question.
