NASD Members Bestow Gift Upon Themselves

Hot news over the wire this afternoon, for those eager for their Sunday regulatory news fix: NASD members have overwhelmingly approved merging their regulatory oversight with the New York Stock Exchange.

The NASD press release is entitled "NASD Member Firms Embrace Streamlined, More Efficient Regulation," and quotes NASD chief exec Mary Schapiro as saying "The securities industry has embraced replacing an outdated regulatory structure with one that better serves firms and investors in a fast-changing marketplace."

A Wall Street Journal online article (subscription required) observes that smaller firms opposed the merger, in the view that it would "weaken the voice of smaller firms within NASD." OK, but what benefits, if any, will this merger bring from an investor perspective?

As the mutual fund scandals proved, competition among regulators is a good thing. With some exceptions, such as this Bloomberg column that I mentioned some weeks back, the media has generally skipped over the negative impact of the merger on investors. Hopefully the coverage overnight will be more skeptical than we've seen in the past.

UPDATE: In an interview for the Journal edition that appeared the next day, Schapiro said "This is a great thing for our industry and investors." She did not even bother to explain how reducing the number of regulators could possibly benefit investors. The New York Times ran a brief Bloomberg story that also did not mention investor impact, which was not mentioned in the Reuters coverage eithr.

However, the AP managed to squeeze in a few words on the subject. It quoted the president of the Public Investors Arbitration Bar Association as opining that "combining the two regulators is 'anti-investor' because it eliminates choice." Well, I guess a dozen words is better than nothing, which has been the norm in media coverage of the merger.

© 2007 Gary Weiss. All rights reserved.

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