BROKERS STATE THEIR CASE ON LICENSING

Fearless in the lion’s den, an official with the brokerage industry’s top lobbying group told state regulators last week that stockbrokers shouldn’t need licenses from more than one state.

Brokers at the annual conference of the North American Securities Administrators Association in Las Croabas, Puerto Rico, also complained that states hold up licenses for brokers who have minor violations on their records when they transfer to new firms.

“The securities industry is still operating under a system that was designed 65 years ago,” Steven Judge, senior vice president of government affairs for the Securities Industry Association, said during a panel discussion.

The Washington-based SIA calls the current process burdensome. The lobbying group also protests that states often repeat actions against brokers who have already been fined by the Securities and Exchange Commission.

Mr. Judge said brokers want to eliminate the “inefficiencies and inequities that arise in the context of state licensing.”

Regulators succeeded earlier this year in eliminating the SIA’s proposal as part of a bill before the Senate to streamline securities regulation.

Brokers are still pressing ahead, says Mr. Judge. They’re trying to keep the issue in front of state regulators and Congress, hoping to negotiate some sort of compromise.

The three-day conference was intended to be a broad discussion of regulating the industry in the future, from online brokerage to day trading advertising. But the overwhelming discussion in the hallways revolved around this issue of how states should be involved in brokerage regulation.

Under the current system for stockbrokers, “some states will continue to review the license of brokers who have a minor disciplinary history which may be in the distant past,” Mr. Judge said.

Many brokers in that situation withdraw their license applications rather than go through lengthy state reviews, because they don’t feel they will be treated fairly by the states, he said. “That prevents due process of law from taking place.

“There are many examples of applications of brokers being held up because of minor problems,” he said. Brokers at the conference repeatedly questioned state officials, saying that if the states had not revoked licenses of their representatives at the time a complaint is lodged, why should their licenses be reviewed when they transfer to another company?

Naturally, regulators on the panel disagreed.

“None of us are opposed to streamlined, efficient regulation,” but not to the extent that it would jeopardize investor protection, said Deborah Bortner, director of securities in Washington’s Department of Financial Institutions.

Maine securities administrator Christine Bruenn said that if brokers want due process from state regulators they should not withdraw their applications. Less than 8% of the 600,000 brokers have customer complaints or regulatory actions on their records, she said.

When brokers who have such records apply for a new license, she said, “My whole reason for being is to look at that application and make sure that it will be safe for my citizens to deal with this person. I resent the implication that we don’t give due process.”

She added: “Until I investigate a complaint I don’t know that it’s unfounded. They don’t trust the states to give them a fair evaluation. I don’t think it’s true. I don’t think it’s fair.”