Chidem Kurdas
Brokerages can play a key role in stopping fraud. Thus in 2008 Pershing stopped wiring money for its customer, Robert Allen Stanford’s Houston-based company. The money wired was being used for purchases of so-called certificates of deposit issued by the Antigua bank that Stanford used to front his Ponzi scheme.
That was under the old laws. Now broker/dealers face so many new requirements that Pershing has a special team just to deal with regulatory changes. Jeffrey Abramczyk, director of finance at Pershing, says there were 12,000 updates last year from regulators in various countries. He was speaking at a New York State Society for CPAs conference.
Being a global firm multiplies the overload of new rules because it means being subject to multiple national regulatory systems. While the 2010 Dodd-Frank financial law is being translated into numerous specific rules in the United States, other countries are coming up with their own new requirements.
Regulators have assigned dedicated staff to certain large financial firms, which in turn have personnel focused on a particular regulator. The Federal Reserve has two people dedicated to Pershing, one for compliance and the other for systemic risk issues, Mr. Abramczyk says.
All costs a lot. Much of the additional regulatory costs will certainly fall on investors and bank customers, in one form or another. The question is what benefit will be gained from this cost. It is very expensive and we don’t know how much value it will add, Mr. Abramczyk says. He sees it as healthy to the extent that more extensive examinations by regulators will help protect investors from fraud.
Whether or not the new requirements will inhibit fraud is to be seen, says Michael Macchiaroli, associate director of the SEC Office of Broker/Dealer Finances.
The changes for brokerages include large amounts of information they will be required to give regulators. Will any of this help apprehend someone like Stanford earlier? He was finally nabbed in February 2009.
Tags: Dodd-Frank, Federal Reserve, Jeffrey Abramczyk, Michael Macchiaroli, NYSSCPA, Pershing LLC, Robert Allen Stanford, Securities and Exchange Commission
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