Top Securities Regulator Warns Industry Must Clean Up Its Act

THE JOURNAL RECORD, May 2, 1994 | Go to article overview

Top Securities Regulator Warns Industry Must Clean Up Its Act


WASHINGTON (AP) _ The nation's top market regulator told the securities industry Thursday it must do a better job removing sleazy brokers and warned of bigger fines and other sanctions if it doesn't happen.

Arthur Levitt Jr., chairman of the Securities and Exchange Commission, said that while "all but a few brokers are honest," the actions of a few have sunk public confidence in brokers to new lows, on par with lawyers and lobbyists.

The problem threatens to undermine confidence in the markets, he said, which could produce serious long-term effects on the economy by making it more difficult for businesses to raise money for expansion.

"When a broker recommends a given security, the investor should never have to second guess: Is this in my interest, or is he just trying to make a quick buck?" said Levitt.

Levitt's speech, before the spring conference of the National Association of Securities Dealers, accompanied the SEC's release of a study on problem sales practices in the industry.

The study, begun in August 1992, focused on problems at nine of the largest retail brokerage firms, which account for about 49 percent of all public accounts. The SEC study, called "the large-firm project," said 25 percent of its examinations led to referrals for additional enforcement action.

"Frankly, we were not surprised to find sales practice abuses," Levitt said. "But the problems we found were not indicative of a greater systemic breakdown."

There is longstanding concern that some securities engage in high-pressure sales tactics to entice investors into investments that don't suit their needs or level of sophistication. …

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