In a little-publicized move, the NASD has formed a Public Information Review Initiative, which would radically expand investors’ access to information about brokers.
Currently, a client can contact the NASD to retrieve past complaints–even unsubstantiated ones–about a broker dating as far back as two years. But the new initiative could change that (for the worse, so far as brokers are concerned.)
Under the proposed initiative, all complaints would remain on a permanent record, and any additions to that record would be available via e-mail to investors who sign up for the planned alert system. In addition, test scores, such Series 7 grades, would be accessible through the updated NASD system.
Brokers are not pleased with this prospect.
"When something is one-sided like this, the whole discussion is slanted against the broker," one broker says. "This doesn’t really do a service to the public whatsoever."
The NASD proposal is currently in the "comment" stage, so spokespeople at the company aren’t talking.
At an early March meeting, called by the NASD and featuring various members of the Securities Industry Association, the essentials of the plan, including the above changes, were laid out, ostensibly for discussion purposes. But a source attending the meeting says NASD presenters implied the adoption of these changes was a matter of when, not if.
"It was presented like this was definitely happening, and that we should prepare ourselves," says the source. "This wasn’t necessarily a matter up for debate."
The "comment" stage might not be the only reason the plan has yet to be implemented. In March, Congress held subcommittee hearings on a bill sponsored by Rep. Rick Renzi (R-AZ). The bill protects the NASD from suits related to the disclosure of broker information. If, for example, the NASD system provided your client with information that led to him dropping you, the NASD could not be held liable–even if the information provided by the system was erroneous.
Industry insiders posit that the NASD’s proposal wouldn’t pass until the protective legislation passed. That bill appears to be moving rapidly. Introduced on Feb. 27, 2003, it was subcommittee meetings less than a week later.
Brokers dread the introduction of another complicating factor to their professional lives. "It’s not really doing anything but making it look like everything is the broker’s fault," says one broker. "All it does is make it look like the NASD is taking a tough stance."
Oh, one other thing: "It’ll cost me clients–and money," he adds.
