From what I have seen they should fine the NASD for doing such a shitty job. For example SCII is the perfect example of SHITTY NASD that hurt many investors. Amazing that it still is trading at all!!
Take a look at how many trading halts there have been since the NASDQ took over this function for OTC BB STOCKS. otcbb.com WHAT A JOKE!!!
centralohio.thesource.net
NASD broke securities laws
No fines but $100 million commitment being sought
August 9, 1996
WASHINGTON (AP) - The Securities and Exchange Commission on Thursday said NASDAQ's parent company broke federal securities laws by failing to properly police the nation's second-largest stock market.
The SEC, citing ''a number of serious deficiencies,'' charged the National Association of Securities Dealers Inc. fell victim to undue influence of large Wall Street firms in its oversight and supervision of NASDAQ. It criticized the NASD for not moving quickly to punish firms that suppressed competition in NASDAQ stock prices through harassment and secret trading agreements.
''The NASD failed over a period of time to conduct an appropriate inquiry into an anticompetitive pricing convention among NASDAQ market makers, even though the NASD knew of facts and circumstances evidencing such matters by 1990,'' the SEC said in a detailed report.
The NASD wasn't fined, but it agreed to spend $100 million over the next five years to improve market surveillance on NASDAQ - nearly doubling the annual enforcement budget of $120 million. The SEC case also calls on the NASD to embark on a series of reforms, some of which have been put in place in recent months.
William R, McLucas, the SEC's enforcement director, defended the decision not to fine the NASD.
''The better idea is to write the check and improve the market and improve the system and improve the discipline,'' McLucas said in an interview with The Associated Press. Essentially, the SEC cited the NASD for failing to enforce securities law violations and its own rules in relation to misconduct by brokerage firms.
The NASD, which didn't admit wrongdoing, also is required to put in place a series of major new rules prohibiting dealers from coordinating price quotes and trades and protecting the independence of its regulators.
The case doesn't conclude the legal problems of NASDAQ dealers. A major civil lawsuit is pending against 33 firms in U.S. District Court in Manhattan, which is pending certification as a class-action case. And the SEC is poised to release a series of new rules later this year to improve handling of customer orders on NASDAQ.
The SEC action is the latest in a series of developments that are radically changing NASDAQ and the NASD, an industry self-regulatory group with broad powers to police 510,000 brokers and securities professionals and 5,400 firms.
The Justice Department last month wrapped up a price-fixing investigation involving 24 big NASDAQ dealers that required new and expensive procedures to prevent traders from colluding to keep prices artificially high.
The NASD itself has enacted numerous reforms, which were outlined in a special study headed by former Sen. Warren Rudman, R-N.H. It created a new separate division, NASD Regulation Inc., to handle its market policing duties; hired several seasoned regulators to run the new operation; expanded public membership on its boards of directors; increased its budget by $10 million and began hiring 131 new professionals.
Some veteran securities lawyers said the SEC's case doesn't break much new ground, considering the reforms already under way at the NASD.
''This particular action isn't going to have a direct effect on investors. Most of what it involves is, in a sense, what the NASD has already implemented,'' said Harvey L. Pitt, a veteran securities lawyer in Washington.
McLucas strongly disagreed, saying the SEC's settlement provides for a series of specific reforms to enhance the independence of NASD's regulatory role and prohibit dealer behavior that impedes competition.
The SEC's report marks the agency's most explicit criticism so far about price competition in NASDAQ and cites numerous abuses by major NASDAQ dealers.
''NASDAQ market makers have engaged in a variety of abusive practices to suppress competition and mislead customers,'' the report said.
By 1990, the NASD became aware of information suggesting that brokerage firms were engaged in wrongdoing that ''had potential anticompetitive implications,'' such as dealers keeping their buy and sell quotes artificially wide. Such a practice raises investors trading costs.
''The NASD failed to take appropriate action to thoroughly investigate these problems and take effective regulatory action,'' the SEC said.
McLucas argued investors stand to benefit from the SEC's case because the publicity over such charges, coupled with the rule changes, will provide a fundamental ''cultural change'' in NASDAQ.
The SEC's settlement order requires the NASD to enforce rules to improve market maker competitiveness, such as forbidding dealers to coordinate quoting of their prices or harassing other firms that inject more competition.
And the order provides greater independence from NASD committees, which traditionally have been dominated by industry, the SEC report said.
The SEC and Justice investigations were driven by academic studies, and subsequent private lawsuits, showing the gap between the buy and sale price of NASDAQ-listed stocks is much wider than that of comparable stocks listed on the New York Stock Exchange. That price gap, known as the ''spread,'' represents a major portion of the dealers' profit. A wide spread served to increase investors trading costs.
But the SEC drew criticism itself.
''One might wonder how it could have gone on under the SEC's nose all of these years, because they have oversee NASDAQ,'' said William Lerach, a San Diego-based securities attorney. ''I hope the SEC will do a better job in overseeing the market than it has in the past.''
NASDAQ isn't a stock market in the conventional sense, but a broad network of computers and telephones that allow brokerage firms worldwide to trade stocks such as Microsoft and Apple Computer. Its growth has mirrored the explosion in the technology businesses, and now rivals the NYSE. By some measures, NASDAQ is the world's second-largest stock market. |
