The Blog Of The Securities Industry Professional Association

Will Trump Change Regulation on Wall Street?


A chance for regulatory reform in the future

Now that the Trump hysteria has settled down and the ‘snowflakes’ have stopped protesting in the streets and the mass media has finally lifted their collective jaws off the carpet, it’s time to look at some of the proposals that Trump has made that could impact our industry.  In one of his many interviews, Trump mentioned requiring two (2) regulations be erased for every One (1) that is introduced.  To say my heart stood still and my jaw dropped like the press is an understatement!

For years I have watched as every President since “Maximus Reagan” has instituted and supported one regulation after another.  In my opinion George Bush and Barrack Obama belong on the Mt. Rushmore of “Government Interference and Regulation”.   Those two never heard of a regulation or requirement they didn’t like.   We are hoping that Mr. Trump also includes the Securities and Exchange Commission under this requirement.  Imagine a world in which your Supervisory manual was 100 pages long instead of 500?  This brings us to small broker dealers and the rules plaguing them and the economy and we began to list regulations that really need to be addressed, so here are a few rules/regulations that need to be removed in our opinion:

  • Price Quotations: Years ago, when I was a mere lad starting out on Wall Street as a cold caller, 6 brokers shared a single green screen quote machine that could handle one stock symbol at a time.  Investors would check the papers the next day to see what their stock finished at the day before.  Today, I can use my I-phone to see where DAX s trading at and get quotes on the Hong Kong Exchange…Isn’t it kind of silly to have brokers calling around for different stock and bond quotes?  The 70 year old investor in Iowa literally has as much information on his Samsung as the broker working on Wall Street.
  • Net Capital Requirement for firms using a clearing firm: Why do firms waste so much time and money on accountants, FINOPs, reports and submissions when the reality is that if they have a large deposit at a clearing firm and all their clients money and stock certificates are at the clearing firm, who cares if the introducing firm entered into a large lease or lost money last month?  Why can’t the introducing firms operate at a loss from time to time to offset taxes and or losing positions?  As we saw from the Wall Street melt down, the argument of financial soundness is nothing more than a myth.
  • PCAOB Requirement: Speaking of Wall Street meltdowns, in 2008 and 2009 we witnessed the behemoths of Wall Street admit they were and had been upside down for quite some time.  What is the point of paying huge amounts for a PCAOB audit of your firm when it really doesn’t matter?  It’s time to get over this notion and charade of ‘Financial Strength”. More importantly, a firm that trades Mutual Funds directly through the Fund Company or a private placement firm that uses an Escrow Account needs a $10,000 to $20,000 audit for what exactly?
  • Legal opinions for stock certificates: Over the past few years, DTC has been publishing a list of Attorneys that they will no long accept legal opinions from.  The more important question is why these opinions are necessary anyway?  Maybe if DTC and the Clearing firm did their job it wouldn’t be necessary in the first place.  Better yet, if they would knock it off with all the restrictions placed on 144 stock and other private investments, hundreds of millions could be saved each year.  Getting a legal opinion is worthless unless the opinion is correct, and the assumption that an attorney opinion is infallible is absurd.  They can make mistakes too. DTC is like the Mafia in ‘Goodfellas” in which they get paid no matter what.  So why not make THEM do their job?


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January 23rd, 2017



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