Wall Street Polices Itself: How Securities Firms Manage the Legal Hazards of Competitive Pressures
Wall Street Polices Itself: How Securities Firms Manage the Legal Hazards of Competitive Pressures explains how the self-regulatory system for U.S. securities firms works within three tiers of supervision. Overseeing the whole system is the U.S. Securities and Exchange Commission, which directly supervises such self-regulatory organizations as the New York Stock Exchange and the National Association of Securities Dealers. In turn, these organizations oversee the broker-dealer firms that conduct the daily business of buying and selling securities. The system relies heavily on the firms' internal supervisory systems to prevent violations of securities laws, since they are in the best position to track their own internal activities. Firms may be fined, or subjected to much more stringent penalties, if their supervisory systems fail. A widely shared perception is that this sort of securities self-regulation does fail--often and repeatedly. Public investigations, press reports, books like Liar's Poker and Den of Thieves, and such films as Wall Street have hammered broker-dealer firms relentlessly since the early 1980s. However, the surprising truth is that we do not really know what transpires in the regulatory operations of firms like Merrill Lynch or Salomon Smith Barney because the well-publicized failures tell only part of the story. David P. McCaffrey and David W. Hart provide readers with a fuller picture by offering an in-depth examination of how this regulatory system works, the types of regulatory problems that broker-dealer firms encounter, why some firms have more problems than others, and what experiences with the system can suggest about how to improve self-regulatory systems in general. Drawing extensively upon prior work on securities regulation in the areas of economics, law, and management, this book will greatly interest professionals in the securities industry and those in business regulation generally, and will also appeal to students of corporate strategy and culture, of legal and social issues in management, and of regulation.
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2 The Social Benefits and Risks of Entrepreneurs and Free Agents
3 Government Regulation of BrokerDealer Firms
4 Controls at SelfRegulatory Organizations and BrokerDealer Firms
5 Private Litigation and Arbitration
6 Economic and Technological ChangesCoping with New Regulatory Problems
7 Differences among BrokerDealer Firms
8 Foundations of Effective SelfRegulation
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Página 100 - To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
Página 100 - ... (A) To employ any device, scheme, or artifice to defraud, (B) To make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (C) To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon...
Página 96 - In recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.
Página 96 - Use due diligence to learn the essential facts relative to every customer, every order, every cash or margin account accepted or carried by such organization...
Página 47 - Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, and the Investment Advisers Act of 1940.
Página 57 - ... (i) there have been established procedures, and a system for applying such procedures, which would reasonably be expected to prevent and detect, insofar as practicable, any such violation by such other person, and (ii) such person has reasonably discharged the duties and obligations incumbent upon him by reason of such procedures and system without reasonable cause to believe that such procedures and system were not being complied with.
Página 49 - Commission, by order, shall censure, place limitations on the activities, functions, or operations of, suspend for a period not exceeding twelve months, or revoke the registration of any...
Página 206 - Report pursuant to Section 21 (a) of the Securities Exchange Act of 1934 regarding the NASD and the NASDAQ Market, August 8, 1996.
Página 109 - ... meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forwardlooking statement...