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Non-Tech : Bid /Ask Spreads - Market Manipulation

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To: Robert Everett who wrote (39)	8/27/1996 6:30:00 PM
From: Eric Hovdesven	of 308

This NASD complaint address, like the SEC's complaint address may do more damage than good. Time and time again I have come across investors who have filed complaints with the SEC or NASD regulatory division and not been told about the distinction between filing a complaint with a regulatory body and filing an arbitration claim. Regulatory bodies may investigate complaints but they DO NOT recover funds for investors who have been fleeced. My concern is that this publicity about the NASD's "complaint line" may cause investors to file a complaint and feel that the NASD will resolve the matter. I have heard figures that no action is taken by a regulatory body for 90% of customer complaints filed with them. Why? Well certainly many complaints are a misunderstanding or unwarranted but also regulatory bodies have less resources and a higher standard of proof to meet in taking action. Even if they can take action that usually means the firm is fined or the rep suspended, but no money is returned to the customer. Disgorgement funds have on occassion been set up as a part of a settlement agreement. So investors should be aware that if they have had a problem, do some research determine if some wrongful acts have been committed and then file your own claim in arbitration or find an attorney through a referral service such as the Public Investors Arbitration Bar Association (PIABA). Think of arbitration as a way to try to take the law into your own hands. One should not feel guilty bringing to arbitration if they truly feel they have been wronged, remember arbitration was set up by the industry and for the industry but it can work if used properly. One last note, as a former NASD examiner I can assure all that while clearly there is a conflict of interest in the fox watching the hen house the conflict in reality is not that apparent, none of the people on the front lines feel they are in anyway beholdent to the brokerage firms. In fact one gets in trouble for overlooking violations. The NASD is more efficient, quicker, gets more results and overall a better regulator than any government agency could be, and if we are not going to use a government agency the only way to support a regulator is to assess the industry, and that is the NASD. By the way, this bit about a 1/4 vs. an 1/8 mark up is B.S. It misses the real problems on the NASDAQ market and I will be so bold as to enter my opinion that the aggresiveness in which this case has been handled may be a result of envy by one group of regulators over another. If one has only been ripped of an 1/8 of a point on a microsoft then that they are doing ok. Someone in a business with as many requirements as the securities industry has can not survive on $15 commissions alone, and market makers are not going to risk their capital and time unless they can get a worthwhile return. The problem is manipulation and from everything I have read the only manipulation alleged against market makers thus far is those who attempt to enter bids or asks on 1/8th increments.

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