Weed out 'bad guys,' NASD chief urges Zarb tells brokers lawbreakers won't be tolerated

Securities

March 05, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

Frank G. Zarb, chairman and chief executive of the National Association of Securities Dealers Inc., told brokers here yesterday that they must pull together to rid the industry of the "bad guys."

"They hurt the rest of us," said Zarb, in an off-the-cuff speech to members of the Bond Club of Baltimore at the Omni Inner Harbor Hotel.

Zarb said the NASD will not tolerate brokers who break the law. Over the past year it has toughened oversight of the more than 500,000 brokers who trade securities on the Nasdaq stock market, a subsidiary of the Washington organization.

To improve regulatory oversight, NASD examiners will be required to attend a training academy that will be established at New York University this year, Zarb said.

"The industry will not go back to the good old days of the 1980s," he said.

Zarb, 63, was named head of the NASD about a year ago, shortly after the organization was criticized in a stinging report issued by the Securities and Exchange Commission. The report accused NASD officials of turning their heads while firms that buy and sell Nasdaq stocks cheated investors by manipulating price spreads of stocks.

Zarb replaced Joseph R. Hardiman, a former top executive at Baltimore-based Alex. Brown Inc., who had been with the NASD for 10 years.

Zarb is well known in the business world.

Before he came to the NASD, he was chairman and chief executive of Alexander & Alexander Services Inc., vice chairman of Travelers Inc., chairman and chief executive of Smith Barney and energy czar in the Ford administration.

As head of the NASD, he works closely with two other executives, one who heads the organization's regulatory arm and another who is president of the Nasdaq stock market.

He said that in the past 12 months improvements have been made to the organization and the Nasdaq stock market.

Small investors are being treated as equals with the large institutional investors.

"I think the playing field is level," he said.

Tensions between the NASD and the Securities and Exchange Commission have eased, too, mainly because of improved communication.

"If we blew it, we say we blew it," he said. "That has helped us with the commission."

Zarb said the NASD is working to clean up the OTC Bulletin Board, an electronic market where thousands of small companies are traded.

The NASD manages the bulletin board, but the stocks are not listed on the Nasdaq market because the companies either don't meet Nasdaq's listing standards or don't file financial disclosure statements with the SEC.

Therefore, they pose greater risks to investors.

"I think we have made a good start," Zarb said. "I am not nearly satisfied."

Pub Date: 3/05/98

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