Friday, March 17, 2006

You Can Beat NASD Enforcement

There is a prevailing thought among brokers and firms that when faced with an NASD Enforcement proceeding, the firm or broker must settle the case. The thought is premised upon the belief that the NASD has unlimited resources, it gets to pick the cases it brings, and questions about the independence of the hearing panels.

Quite a bit has changed in enforcement proceedings over the years, and while the Staff still gets to pick it cases, and throw money at those cases, hearing panels today consist of an NASD Hearing Officer and two members of the industry. The perceived bias (which I am not convinced existed) has been diminished by that change, and the restructuring of the hearing process.

Brokers and firms are winning enforcement proceedings. Unfortunately, while the NASD loves to tout their "wins" with press releases, they are not a forthcoming with their "losses" but news of those losses does leak out.

I was somewhat surprised to see this press release, where the NASD announced a loss, and apparently a pretty significant loss, since an NASD hearing panel dismissed a disciplinary complaint against Invemed Associates, which charged Invemed with unlawful profit-sharing activities in late 1999 and early 2000 in connection with 'hot' IPO shares it allocated to its customers.

Unless the matter is appealed to NASD's National Adjudicatory Council (NAC), or is called for review by the NAC, the hearing panel's decision becomes final after 45 days.
Post a Comment