Complaints Up, Collections Down at NASD

The National Association of Securities Dealers collected roughly half the amount of  fines in 2006 compared to 2005, according to the Associated Press.

The self-regulatory groups’ annual report showed that the organization collected $84.9 million in 2006, compared to $134.3 million in 2005, and issued another $75 million in fines 2006, compared to $148.5 million in 2005. 

The number of disciplinary actions also slipped, but on a smaller scale, going from 1,344 in 2005 to 1,447 in 2006, a 15% decrease. In 2006, the NASD started 1,204 new investigations into disciplinary actions, down 14% from 1,399 in 2005.

During the same period, however, complaints rose. In 2006, there were 5,671 complaints, up 10% from 2005’s 5,137 complaints.

Fees also rose. The New York-based regulator collected $222 million in regulation fees in 2006, compared to $185.4 million in 2005 and $158.7 million in administrative fees in 2006, compared to $145.3 million the year prior.

Because fines are not counted in net revenue, that sum dipped to $586 million, from $603.1 million in 2005.

The NASD cited the closure of several high-profile enforcement actions and investigations as the cause for the dip, including the conclusion of cases that stemmed from the mutual fund late-trading, market-timing and soft-dollar scandals of the early part of the decade.

The Securities and Exchange Commission also cited a dip in enforcement referrals in 2006, with the Office of Compliance Inspections referring only 15% of broker/dealer cases to enforcement, compared to 22% in 2005 and 27% in 2004.

“It may be good news for the industry,” said Harvey Pitt, the former SEC Chairman who now serves as chief executive at Washington-based consultancy Kalorama Partners

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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