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June 12, 1999, 8 a.m.

Wall Street Scuffles With the States

A push by the Se­cur­it­ies In­dustry As­so­ci­ation to stream­line the reg­u­la­tion of stock­brokers is run­ning in­to op­pos­i­tion from state reg­u­lat­ors. The scuff­ling star­ted in late April, when Sen­ate Bank­ing, Hous­ing, and Urb­an Af­fairs Com­mit­tee Chair­man Phil Gramm, R-Texas, asked vari­ous groups to re­com­mend changes that they would like to see in his up­com­ing se­cur­it­ies bill. The SIA—Wall Street’s top trade as­so­ci­ation—re­spon­ded with a pro­pos­al to fed­er­al­ize the state-by-state reg­u­lat­ory sys­tem for brokers. ”We really feel a na­tion­al mar­ket should have a na­tion­al reg­u­lat­ory sys­tem,” said SIA spokes­man Dan Mi­chael­is. ”There’s a great du­plic­a­tion of ef­fort with state reg­u­lat­ors. Ima­gine if you needed a driver’s li­cense from every state you passed through. That’s the kind of re­dund­ancy we’re talk­ing about.”

The North Amer­ic­an Se­cur­it­ies Ad­min­is­trat­ors As­so­ci­ation Inc., a 65-mem­ber group that in­cludes reg­u­lat­ors from the 50 states, is fight­ing the SIA pro­pos­al. ”If en­acted, this pro­pos­al would be fun­da­ment­ally anti-in­vestor,” warned NAS­AA spokes­man Marc Beauchamp. The NAS­AA has ar­gued that the com­bin­a­tion of in­dustry self-poli­cing and mon­it­or­ing by state and fed­er­al of­fi­cials has worked well. If the SIA re­com­mend­a­tion is made part of the Gramm se­cur­it­ies bill, Beauchamp ad­ded, the states’ role in pro­tect­ing in­vestors would be lost. The NAS­AA styles its con­front­a­tion with the SIA as a clas­sic Dav­id-vs.-Go­liath match­up. The SIA spent roughly $ 2.4 mil­lion on lob­by­ing dur­ing the last six months of 1998, while the NAS­AA spent ap­prox­im­ately $10,000 over the same peri­od. The NAS­AA has re­cently re­tained Colum­bus, Ohio-based lob­by­ist Thomas F. Needles, who worked in the Bush White House and was dir­ect­or of the state of Ohio’s Wash­ing­ton of­fice.

Mean­while, the SIA is also bat­tling the mu­tu­al fund in­dustry, over an­oth­er item in the Gramm-in­spired wish list. In April, In­vest­ment Com­pany In­sti­tute Pres­id­ent Mat­thew P. Fink wrote SIA Pres­id­ent Marc E. Lack­ritz to com­plain about an SIA- backed pro­vi­sion that would loosen the rules gov­ern­ing se­cur­it­ies firms’ own mu­tu­al funds. ICI spokes­man Jim Collins said the change would weak­en in­vestor pro­tec­tions against fraud.

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