The NASD guidelines that govern the meetings and incentive practices of 5,000 financial services companies are notoriously vague — and they may not be getting any clearer.
NASD CEO and Chairman Mary Schapiro told attendees at the Securities Industry and Financial Markets Association conference in Phoenix recently that in order to maintain their effectiveness, regulators such as NASD, which oversees 5,000 financial services companies, “must lose the blinders of one-size-fits-all rule-making, [and] evolve at the same pace as today's capital markets.”
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. The downside, she admitted, is that without clear guidelines, companies might have to operate with even 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,” she said. “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.