Enforcement Actions Against Brokerage Firms And Individuals Went Down in 2006, Says Study

Last week, a securities law journal published a study illustrating how securities regulators went “soft” last year. According to the study, NYSE and NASD fined securities companies and individuals $111 million in 2006, which was lower than the $184 million in collective fines that their two regulatory units issued in 2005. Regulators only issued 19 actions of $1 million or greater. There were 25 such actions the year prior.

The report cited a similar decrease in penalties at the SEC. Penalties issued in 2005 were $1.5 billion. Penalties went down to $974 million in 2006.

Barbara Roper, Consumer Federation of America’s Director of Communications, says, however, that public-company managements and brokerage firms actually outdid themselves in their handling of research-analyst conflict, accounting scandals, and mutual fund-trading scandals.

Regulators, however, are facing a definite backlash. The U.S. Chamber of Commerce and others have conducted studies that show that the U.S. could be doomed unless it cuts back on regulations and tries to compete with the lower standards that exist in other countries. Roper says that she believes regulatory agencies have reduced enforcement efforts because of the pressure to regulate less.

In 2006, NYSE and NASD brought only four actions tied to variable annuities. 35 such actions were issued in 2005. Five brokerage firms involved in “directed brokerage” cases-where the mutual funds handed the firms more business-were ordered to pay $13.1 million in fines. In 2005, 27 firms were fined $55 million in similar cases.

However, the NYSE issued 281 actions in 2006. It issued only 110 actions in 2005.

It will be important to see whether regulation numbers continue to go down in 2007.

Shepherd Smith and Edwards is a securities litigation firm that represents investors that have lost investments because of broker misconduct. We have helped thousands of investors recoup their losses. To schedule your free consultation, contact Shepherd Smith and Edwards today.

Related Web Resources:

Regulators Catching Zzzs, Not Rogues, Bloomberg.com, October 3, 2007
U.S. Chamber of Commerce