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Twenty-Nine US Investment Firms Fined For Late Disclosure

by Glen Shapiro,, New York

02 December 2004

The US National Association of Securities Dealers (NASD) announced on Tuesday that it has imposed fines on twenty-nine investment firms, including several leading Wall Street players, over their failure to disclose information about newly-appointed brokers in a timely fashion.

Under NASD rules, after a securities firm hires a broker, it must ensure that information on the broker’s application for registration is kept current in NASD’s Central Registration Depository (CRD). The firm must update that information whenever significant events occur – including regulatory actions against the broker, customer complaints, settlements involving the broker and criminal charges and convictions.

Normally, those updates must be filed within 30 days. If the reportable event involves a statutory disqualification (usually the result of a criminal conviction), the event must be disclosed within 10 days. In addition, firms must notify NASD within 30 days of learning that information disclosed on a termination notice filed for a broker has become inaccurate or incomplete.

However, according to the securities industry association, the twenty-nine firms between them clocked up an impressive 8,000 late disclosures over the period between January 2002 and March 2004. This has resulted in a combined $9.2 million fine.

“Investors, regulators and others rely heavily on the integrity of the information in the CRD public reporting system – and, in turn, the integrity of that system depends on accurate and prompt reporting by firms,” explained NASD Vice Chairman Mary L. Schapiro, adding:

“The fact that so many firms failed in their obligation to report so much important information in a timely way is deeply troubling. These firms and others will understand from the severity of the fines and other sanctions in this case that timely reporting of broker information is a fundamental obligation that cannot be neglected or ignored.”

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