Tuesday, August 31, 2004

NASD Granted First Temporary Cease and Desist Order to Stop Ongoing Fraud by Brokerage LH Ross

NASD Granted First Temporary Cease and Desist Order to Stop Ongoing Fraud by Brokerage LH Ross

Following up from its original filing last month, the NASD announced today that it had successfully used its cease and desist powers against an NASD member firm.

Giving such power to the NASD was a serious concern to securities attorneys back in 2003 when the proposal was being considered. The NASD is often viewed as being overzealous, at least by brokers and firms who are the subject of its vast and unrestricted powers. The concern was that the NASD would use its power to issue such orders in an arbitratory fashion. Given the fact that the NASD claims not to be a government actor, and is in fact subject to little or no oversight, the concerns were significant.

However, the fact that this was the first use of the power since the NASD obtained the authority to issue such orders over a year ago has tempered those concerns. Further, given the fact that at least according to the NASD the case involved a current, ongoing fraud, it appears that the use was justified.

Then again, all I know of the case is what I am reading in the NASD press releases........
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