Securities Markets: Actions Needed to Better Protect Investors Against
Unscrupulous Brokers (Testimony, 09/14/94, GAO/T-GGD-94-190).

Unscrupulous brokers--persons licensed to sell securities who have
seriously breached sales practice rules or have a history of repeated
sales practice violations--can significantly harm investors financially
and can erode public confidence in the securities market. Although
unable to determine the exact extent to which unscrupulous brokers are
operating in the securities industry, GAO obtained data showing that of
almost 470,000 active brokers, about 10,000 had at least one formal
disciplinary action taken against them for a variety of violations,
including sales practice abuse; 816 had three or more disciplinary
actions. Precise information on unscrupulous brokers is unavailable
because abusive sales practices are often difficult to detect and the
Central Registration Depository--a data base maintained by state
regulators and the National Association of Securities Dealers--does not
describe informal disciplinary actions taken against brokers and does
not provide summary data by type of violation for the disciplinary
histories it maintains. Available evidence points to shortcomings in the
detection and discipline of unscrupulous brokers. Furthermore, GAO found
that some practices contribute to a perception that Securities and
Exchange Commission and industry disciplinary actions are lenient. For
example, brokers who were permanently barred have been able to reenter
the industry. Also, brokers barred from the securities industry are free
to work in other financial sectors, such as the banking and insurance
industries.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-GGD-94-190
     TITLE:  Securities Markets: Actions Needed to Better Protect 
             Investors Against Unscrupulous Brokers
      DATE:  09/14/94
   SUBJECT:  Securities regulation
             Brokerage industry
             Employee dismissal
             Consumer protection
             Reporting requirements
             Information disclosure
             Sanctions
             Ethical conduct
IDENTIFIER:  National Association of Securities Dealers Central 
             Registration Depository
             
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