"People are not deciding to invest in these markets out of fear. They’re investing out of hope"

As chief lobbyist for the brokerage industry, Marc Lackritz, 53, isn’t afraid to make waves. Last year he drew heavy criticism from consumer groups, regulators and the mutual fund industry when the Securities Industry Association proposed relaxing laws governing broker registration and the types of trades that investment advisers can engage in.

Mr. Lackritz also has taken the risky stand of supporting some level of private accounts for Social Security.

In e-commerce, he is fighting to prevent taxation of the Internet, legalize electronic signatures, and bring down fees for stock market quotes. This has won him kudos from online brokerages.

“Marc gets it…They’re always looking at stuff that is out of the box. They’re looking at stuff that’s going to impact the industry five years down the line, not just this session. That’s unique for a lot of trade guys,” says Frank Kelly, senior vice president and head of government affairs in Charles Schwab Corp.’s Washington’s office.

Mr. Lackritz, who attended Oxford University with Bill Clinton, first came to Washington to serve on the Senate Watergate Committee staff. He says his career objectives were “to combine public policy interests with my background in economics and public finance.”

When he’s not battling regulators, he and his wife, Mary, spend Friday afternoons tutoring in an elementary school in the Anacostia section of Washington where 40% of the students are homeless.

He confesses he sometimes wonders if it helps. But he draws on an old story about a man who throws back some of the millions of starfish that wash up on the beach. While most perish, he says, it matters “to the couple of guys you save.”

Q Online brokerages see issues like Inter- net taxation to be critical, while traditional brokerages are less concerned. How can you represent this fragmented industry?

A It’s a more diverse industry in the sense that there are far more choices and opportunities for investors and consumers than they’ve had before. But from the standpoint of our organization and what we need to do, our focus is on making sure that what we do and what we work on is going to be in investors’ best interests. That unifies everybody, whether you’re an online broker, whether you’re a full-service broker, or whether you’re an investment bank.

In the past you have seen a lot more zero-sum issues, where one side would win at the expense of another side. What we see now is that the key for us as an organization is to keep our eye on expanding the pie. If we can grow our business, everybody benefits.

Q Securities and Exchange Commission Chairman Arthur Levitt has voiced concern about conflicts of interest if the New York Stock Exchange and the Nasdaq are privatized. What structure does SIA prefer?

A There are a couple of alternatives that are fairly attractive, where you would be able to help streamline some of the self-regulatory functions and yet leave market surveillance functions and those kinds of activities with the marketplaces themselves.

The status quo creates problems in a demutualized environment because of obvious conflicts of interest. No one in the industry supports eliminating self-regulation.

Q Won’t the brokerage industry be swallowed by bigger deregulated companies?

A The number of our bank-owned members has doubled in the last three-and-a-half years. We now have more than 110 owned by banks. We have about 50 owned by insurance companies. We have a very big tent; it’s a fractious, diverse, competitive and extraordinarily successful tent. Fair competition is the key. But we also have to be involved in issues that involve financial holding companies.

Q What about consumer groups trying to get states to pass tougher privacy laws?

A There are 17 states right now that are considering privacy legislation. The other way of looking at it is for us to do a better job of educating legislators, consumers, the public, as to what actually is happening in the privacy area. The privacy protections that are contained in the Gramm-Leach-Bliley Act are the most far-ranging and sweeping and significant privacy protections that have ever been enacted. They really do give consumers a wide range of rights to maintain their privacy and the privacy of their data in this new world of financial modernization. We want privacy protections that don’t preclude consumers getting opportunities that they want and that don’t create inefficiencies in the businesses that keep us from innovating and from offering new products and services.

Q Do you think you can get that through to consumers? The public focus has been on fear, rather than on opportunities.

A It’s always easier to appeal to people’s fears than to appeal to their hopes. I think this is about opportunities and hopes and aspirations for people. We’re not going to get it through the free media, I’m confident of that. But I think from the standpoint of our marketing efforts, and just our investor education efforts, and with the Internet, we have a lot of different channels to talk to investors and consumers to educate them.

We think that they’re going to like this new environment. They already have shown that they like it. We have far more investors now in our markets than we had 10 years ago. Almost half of all families are invested directly or indirectly in the stock market, compared to 10 years ago, when we only had a third, or 20 years ago, when we had about a fifth. Obviously, people are not deciding to invest in these markets out of fear. They’re investing out of hope, and I think that’s an important distinction.

Q What do you think the big issues will be this year?

A The fact that we have a projected surplus gives us a good opportunity to be strong and effective and successful advocates for new savings and investment incentives along the lines of expanded IRA’s, reformed pension rules and regulations, and new savings programs such as these Retirement Savings Accounts. Retirement savings is going to be an important theme for us and for all the financial services industry this year and going forward because of the demographics.

We have a major concern to try and reduce the Section 31 fees that are charged on transactions and registrations on the exchanges. Currently the government receives about $1.9 billion in Section 31 fees, and the SEC’s budget is less than $400 million a year.

Q Does the industry see much promise for the retirement savings account?

A We think the RSAs are a big improvement over last year’s proposal (for universal savings accounts). A number of our firms have already expressed a lot of interest, a lot of support. As a concept, it’s very encouraging.

Q What lessons do you draw from the outcry from fund industry and consumer groups last year on several of your suggestions for securities regulatory reform?

A What we were doing is putting together a list of what we thought were measures that were going to improve market efficiencies, and improve products and services for customers. The trend is toward national standards, international standards. We’re working to harmonize international accounting standards, and we still have to deal with 50 different state registration schemes.

We were not suggesting that the states should be out of the enforcement business. What we were suggesting is merely streamlining a process.

With respect to restrictions on principal trading, we were not talking about removing all protections against conflicts of interest. What we were talking about is trying to provide some flexibility for the broker-dealers to execute transactions that were in the pension funds’ and mutual funds’ best interests.

Vitae

Marc Lackritz, 53, president since 1992 of the Securities Industry Association.

Experience: 1987-90: executive vice president, head of Washington office of the Public Securities Association (now the Bond Market Association).

1984-87: Staff director, chief counsel, House Energy and Commerce subcommittee on telecommunications and finance.

1974-77: Deputy chief counsel, Senate Budget Committee.

1973-74: Assistant counsel, Senate Watergate Committee.

Crowning achievement of SIA tenure: Passage of financial modernization legislation, 1999. The SIA represents more than 740 securities firms. In 1999 the U.S. securities industry generated over $300 billion in revenue, with the bulk of it managed by SIA member firms.