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Regulators Join Forces on Brokerage Reform

October 04, 2002|WALTER HAMILTON | TIMES STAFF WRITER

NEW YORK — State and federal securities regulators will draw up a unified set of demands and present them to major brokerages in the next few weeks in hopes of resolving the multiple probes of alleged Wall Street misconduct, officials said Thursday.

Meanwhile, the New York Stock Exchange and the NASD (formerly the National Assn. of Securities Dealers) on Thursday proposed new rules governing stock analysts' practices.

Public pressure for broad-based reform of brokerages has mounted in recent months amid the wave of revelations about potentially tainted analyst advice and awards of new-stock offerings to certain clients in the 1990s.

Regulators, including Securities and Exchange Commission Chairman Harvey Pitt and New York Atty. Gen. Eliot Spitzer, said their joint effort could speed a universal settlement with brokerages. Regulators want a resolution to lift the cloud of scandal that has hung over financial markets; brokerages are eager to end their public relations woes.

Regulators said they will present their demands to brokerages and give them a "brief opportunity" to reply. If a settlement can't be worked out, regulators then would sue the firms.

The unified approach could bring a "more rapid closure," Spitzer said in an interview.

The coordination also could end what has appeared to be a heated competition among regulators in their various investigations.

At a minimum, demands for reform are expected to include requirements that brokerages protect their research analysts from influence by investment bankers.

The NYSE and NASD, in their proposal Thursday, sought to ban analysts from "pitch" meetings at which brokerages solicit banking business from companies.

Another proposal would require that a special committee at each brokerage determine analyst compensation based on stock-picking performance, with no consideration given to analysts' contributions to investment banking.

Also Thursday, the NYSE and NASD said 11 people were named to a committee that will look into reforms of the initial public stock offering process.

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