Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > State Regulation

NYSE, NASD Set to Combine with Schapiro as Head of New SRO

Your article was successfully shared with the contacts you provided.

After all but announcing the deal during the Nov. 8-10, 2006, Securities Industry and Financial Markets Association (or SIFMA) launch in Boca Raton, Fla., NASD and NYSE Group say it is official: like the former Securities Industry Association and Bond Market Association, the two are merging. The regulatory bodies signed a letter of intent to form a new self-regulatory organization, or SRO, on Nov. 28 to “improve the efficiency and consistency of securities industry oversight” while saving the industry an estimated “millions [of dollars] per year.”

“This is a significant step forward for America’s investors and for our nation’s capital markets,” says SEC Chairman Christopher Cox. “Protecting investors from fraud in today’s complex, integrated markets requires that regulators look across markets to prevent wrongdoers from exploiting the seams in regulatory jurisdiction. Eliminating overlapping regulation, establishing a uniform set of rules placing oversight responsibility in a single organization will therefore enhance investor protection while increasing competitiveness in our markets.”

Industry groups, which have been behind the move for some time, quickly gave their support. “This is great news for investors, the industry and the public,” explains Marc Lackritz, co-CEO of SIFMA. “By making regulation clearer, less redundant and more cost efficient, compliance and supervision will become more effective and efficient,” shares Micah Green, co-CEO of SIFMA. (SIFMA members began issuing reports that advocated such an organization in 2000.)

The CFA Institute also expressed its enthusiasm. “We strongly support the merger, because it addresses long-standing concerns about duplicative regulation between SROs in the United States for many years,” explains Tom Larson, CFA and a senior policy analyst at the CFA Institute Centre for Financial Market Integrity. “With the demutualizations of Nasdaq and NYSE, the current SRO system has not kept pace with changes in the market. We believe that the current proposal to merge NASD and NYSE Regulation will provide a positive step in improving the efficiency and efficacy of our self-regulatory system.”

Currently, NASD oversees all securities firms doing business in the United States, while NYSE Regulation regulates about 200 of these firms who are members of the New York Stock Exchange. U.S. securities firms spent $25.5 billion in 2005 on compliance, a 95 percent increase from 2002, according to industry estimates.


What: A new self-regulatory organization that will regulate 5,100-plus securities broker-dealers, 116,000 branch offices and 650,000-plus registered reps doing business with the U.S. public. It will be named at a later date.

Who: To be led by NASD Chairman and CEO Mary Schapiro (as CEO); NYSE Regulation CEO Richard Ketchum will serve as chairman. The group will include some 2,400 NASD personnel and 470 NYSE Regulation staff.

When: To start operations in 2Q ’07.

Where: To operate from Washington, D.C., New York and 18 district and dispute resolution office locations across the country.

How: The transaction will require some amendments to NASD by-laws, subject to a NASD member vote, and the execution of a definitive agreement. The plan also must be reviewed and approved by the SEC.

Etc.: When the deal is closed, each NASD member firm will receive $35,000 in recognition of anticipated cost savings resulting from the merger; some member fees also will be reduced for five years.


Send thoughts or comments to [email protected].


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.