A single cop will police all brokerage firms in the United States starting in mid-2007 under a merger unveiled on November 28 between overlapping regulators, saving Wall Street tens of millions of dollars a year.
The New York Stock Exchange Regulation unit will fold its brokerage firm oversight operations into NASD, the nation's largest brokerages watchdog, said the two self-regulatory organisations at a joint news conference here.
NYSE Regulation, a unit of Big Board parent NYSE Group Inc, said it will retain its responsibility for overseeing trading activity on the NYSE itself, as well as related enforcement and listing standard compliance duties.
NASD will also continue its work as trading regulator for the all-electronic Nasdaq Stock Market.
But oversight of NYSE member firms will be centralised under the new organisation, as yet unnamed, achieving a long-held goal of Wall Street.
"It's a move that's long overdue. There is unnecessary redundancy," said Christopher Bebel, a Houston securities lawyer and former federal prosecutor who represents brokers, as well as individual investors.
There are more than 5,000 securities firms operating in the United States. All answer to Washington-based NASD, formerly known as the National Association of Securities Dealers.
The 200 largest brokerages, as member firms of the NYSE, also are accountable to NYSE Regulation. That double-coverage has caused big brokerages to complain for years about duplicative costs and redundant exams and investigations.
Securities and Exchange Commission Chairman Christopher Cox, speaking at the news conference held at SEC headquarters, said: "The time has come to put an end to the duplication."
He said the merger will save money and improve oversight, as well as smooth coordination with foreign financial market regulators - a key issue ahead, with US and European stock exchanges negotiating mergers of their own.
Cox also said that the deal would reduce concerns about conflicts of interest at NYSE Regulation now that its parent, NYSE Group, has become a for-profit corporation.
Some lawyers questioned what the deal does for investors, especially in the area of arbitration, where individuals try to work out disputes with their brokers. Under the deal, arbitration will be centralised within NASD.
"I have concerns there will be less investor protection," said Jacob Zamansky, whose New York-based Zamansky & Associates represents investors in arbitration cases against brokers.
"I'm also concerned there will not be vigorous enforcement of fraud or misconduct charges against brokers. The trend seems to be in favour of watering down rules," Zamansky said.
Under the merger, NASD Chairman and Chief Executive Mary Schapiro will become CEO of the combined organisation, expected to begin operations in the second quarter of next year and consist of 2,400 NASD and about 470 NYSE Regulation staffers.
She said brokerage firm annual savings resulting from the combination will be "in the tens of millions of dollars." She said the two organisations have no plans to lay off employees but expect some reductions through attrition over time.
Cox noted that NASD and NYSE Regulation have not yet reached a definitive agreement.
NYSE Regulation CEO Richard Ketchum said he and Schapiro are "very confident" that the merger will proceed. He said he did not foresee any issues that could derail the agreement.
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