NASD: Principles or Rules?
NASD CEO and Chairman Mary Schapiro told attendees at the Securities Industry and Financial Markets Association conference in Phoenix last month that in order to maintain their effectiveness, regulators such as NASD, which oversees 5,000 financial services companies, must “evolve at the same pace as today’s capital markets.”
What this means, she said, is that regulators must “be more sophisticated in understanding and accommodating different business models without compromising investor protection. Part of that means losing the blinders of ‘one size fits all’ rule-making.”
While the NASD regulatory system has long been a combination of principles and rules, she said, NASD can—like the United Kingdom’s Financial Services Authority—move toward more principles-based guidelines, although this could mean companies might be operating with less “certainty and clarity.”
Schapiro pointed to business entertainment as an area where a principles-based approach has caused NASD members some problems. “While some in the industry welcomed a principles-based approach, others were decidedly uncomfortable,” said Schapiro. “Legal and compliance staff, in particular, at many firms felt that such an approach left too much room for interpretation and ultimately, abuse, and the uncertainty of enforcement action.”
NASD recently completed a two-year investigation into the gift and entertainment practices of about 40 member companies and, along with the New York Stock Exchange, has proposed new guidelines that would force companies to come up with specific policies and procedures—a change from the vaguely worded entertainment guidelines found in the current rules.
For more on Schapiro’s speech click here.
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© 2012 Penton Media Inc.
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