Brokers who have had run-ins with their employers, regulators or customers might find themselves on a tighter leash. That could be the result of a proposal that the National Association of Securities Dealers announced Thursday.
The NASD is asking the public to comment on a proposal that would require brokerages to increase their scrutiny of brokers with a history of complaints. Specifically, the NASD wants heightened supervision of brokers who have had three or more customer complaints and arbitrations in the past five years, three or more regulatory actions or investigations and two or more internal reviews or terminations. Of the 663,000 brokers registered with the NASD, heightened security would currently apply to 4,165 brokers.
"Investors face higher risk dealing with a broker who has a long regulatory record," said Robert R. Glauber, chairman and chief executive officer of the NASD. "Securities firms must respond to that risk with enhanced controls."
The NASDs current proposal goes beyond its earlier guidelines on heightened scrutiny of brokers with questionable pasts. After the NASDs board of governors considers public comment over the next 30 to 45 days, the Securities and Exchange Commission must approve any final rule change.