As Schapiro bluntly said, that's not going to happen. Other NASD regulators concur. "It just wouldn't fly," says one NASD district regulator, who admits that while independent brokerage firms and advisors have tended to cause far fewer problems than do their captive peers, it would be virtually impossible to carve them out from regulation.

"Regulators have acknowledged that these are very different times and that as a result there is more regulation to come. So while we don't currently see a moratorium, we might be able to hope for more thoughtful regulation," says Batman, who is also chairman of First Global Inc., a Dallas-based independent broker dealer.

Thoughtful regulations would be welcome, says Michael O. Brown, a former NASD compliance examiner who launched BD Solutions, an Atlanta-based consulting firm, in 1993. In one six-month period last year, his staff found 50 different NASD notices to members that required brokerage managers to ask if their firm needed operating changes. Compounding the sheer volume is the fact that regulations can be dense and often difficult to understand. "Sometimes clients get different answers to questions, district to district and within the same NASD district," Brown says.

Sometimes compliance departments are simply tarred with the wrong feather, Brown says. One case in point: The latest NASD breakpoint rules, which required firms to find cases where brokers and firms themselves may have missed giving customers appropriate breakpoint discounts on the mutual funds they sold them. Firms were required to sift through years of sales, take out advertising underscoring the fact that the public may have been overcharged and send a letter advising each pertinent customer that they may be owed a refund.

Brown maintains that the customer overcharges were caused not by compliance neglect, but by technology that failed to match and calculate total relevant client purchases. "I think as a regulator, the NASD does not understand technology," says Brown. "If they did, I think they would require that chief technology officers be licensed. Right now, they (CTOs) have no skin in the game and until they do, I don't think technology will be the answer regulators want it to be."

Broad-based requests for information that require whole compliance departments to turn on a dime can also be trying, says Leslie Durant, vice president of compliance at Capital Analysts in Radnor, Pa.

"We're following our strategy and the breakpoint issue comes along, with the new technology and additional staff it required. Then regulators add documentation requirements for revenue sharing and shelf space and sponsored programs, and they give you like eight days to respond," says Durant, who recently hired a new compliance person to look daily at mutual fund breakpoint exception reports.

Of the 12,000 letters Capital Analysts sent out to customers who may be able to claim a breakpoint discount refund, "about 275 came back and probably 75 % didn't understand what they were sending back." Durant says. According to the compliance officer, some customers wrote things like: " I have no idea what this is, but if I can get some money back, I'm all for it."

Also of concern are pending regulations that would change the way the NASD defines a branch. In the case of Capital Analysts, the rule would increase their 50 current registered locations to 250, which would quadruple the firm's expense for audits, the travel they require and even for branch registration. There's also some chance that 100 locations could be redefined as OSJs-offices of supervisory jurisdiction-which require more comprehensive supervision and annual audits.

"I'd like to think that some of this will subside soon," says Durant. "It's always in the best interest of customers to be on guard, but I hope regulators come to their senses and realize we're on the same side."