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Technology Stocks : Y2K (Year 2000): Is Wall Street & Banking Vulnerable? -- Ignore unavailable to you. Want to Upgrade?

To: C.K. Houston who wrote (119)	7/27/1999 11:34:00 PM
From: C.K. Houston	Read Replies (1) \| Respond to of 158

SEC Approves Dec. 1 Shutdown For Non-Y2K-Ready Brokers WSJ - July 27 - By Judith Burns WASHINGTON -- In a rule it hopes it won't invoke, the U.S. Securities and Exchange Commission voted Tuesday to shut down any broker-dealer or non-bank transfer agent whose computer systems aren't year-2000 compliant, beginning December 1. Firms must report to the SEC on their Y2K readiness by August 31. Those that aren't ready at that date may continue operating if they certify that their systems will be ready by November 15. "Any firm that cannot achieve Y2K compliance in a timely fashion will be required to cease doing business by December 1" under the new rule, warned SEC chairman Arthur Levitt. While Levitt expressed confidence that the securities industry will be prepared for the century-date change, he said the SEC must be able to identify those firms that aren't ready and to close them down, if need be. "We hope there will be nobody" shut down, said Robert Colby, deputy director of the SEC's market regulation division. But Colby said the rules adopted Tuesday should provide investors with "an extra precaution" against Y2K problems. Concerns center on computers that identify years with two digits, which could confuse 2000 with 1900, potentially wreaking havoc on financial transactions. About 3,900 brokerage firms and non-bank transfer agents are covered by the new rules, yet Colby estimates no more than 50 will report that their computers aren't in compliance by August 31. By December 1, the number of firms that aren't ready should be smaller than that, he added. "We are operating on the assumption that we're not going to be overwhelmed" by a large number of firms that aren't Y2K complaint by year-end, agreed Richard Walker, director of the SEC's enforcement division. For firms that aren't ready by December 1, Walker said the SEC will seek a U.S. court order to shut them down, and to have the firms inform their customers that their computer systems aren't prepared for the new millennium. Brokerage customers will learn of potential problems soon after the August 31 reporting deadline, however, as the SEC plans to post the names of firms that report they aren't compliant on the SEC's website. "There was some question about whether it should be public or not," Colby noted, with some brokers urging the SEC not to identify firms for fear of panicking investors. He conceded that identifying non-compliant firms could harm their reputation, but said investors need advance warning of potential problems in case they want to close accounts, transfer funds, or establish a back-up account elsewhere. Under the new rule, firms that report problems must shut down operations unless the CEO certifies the company's computers will be ready by November 15. Levitt urged brokers and transfer agents to be "forthcoming and candid" in their reports, and warned they could face SEC enforcement action if they aren't truthful about their computer readiness. To determine readiness, the SEC adopted a four-part test to identify if a company has a material Y2K problem affecting "mission-critical" computer systems. A firm that fails to meet any one of the four factors will be deemed to have a Y2K problem. In a change, the new rule won't require small broker-dealers to certify year-2000 compliance for systems they don't directly control, for instance, those in use by their clearing firms. The SEC also gave brokers and transfer agents more time to get their systems ready. A proposed rule considered in March would have required firms to correct all problems by October 15. The final rule gives firms until November 15, providing them another month to whip their computers into shape. SEC staffers said they have no doubt the SEC has legal authority to shut down companies before 2000 if their systems aren't fully compliant. If their computers don't work next year, these firms would go out of business anyway, Colby noted, so the SEC rule will simply close them down "a little bit earlier." "It puts the firms' feet to the fire," and protects investors, said SEC Commissioner Laura Unger, endorsing the rule. SEC Commissioner Norman Johnson also hailed it as a way to respond to firms that "fail to take appropriate cautions" ahead of 2000. Because the new rule applies only to computer problems related to the year 2000, it is temporary and will sunset on July 1, 2001. The SEC didn't act on a more controversial plan which would have given it broad power to shut down firms whose computer systems aren't functioning properly. interactive.wsj.com