The problem as ASA members see it, is that while MCDC fines are based on the size of a firm, they’re capped at $500,000––an amount a number of the mid-market firms paid along with the big boys. (Firms had the option of contesting the charges.)
“We attempted to talk the SEC into some sort of a more proportionate [fine], but they insisted on doing a [per-filing penalty] and a $500,000 limit,” Bradbury said.
An SEC spokesperson declined to comment for this story.
Setting The Agenda
The big Wall Street banks do have an ally in the ASA, though, at least on some issues. Mid-market firms do not support the idea of breaking up the too-big-to-fail institutions, a topic popularized by presidential candidate Bernie Sanders.
Breaking up big banks isn’t feasible, Bradbury says. The better approach is requiring large institutions to carry more capital under the global Basel III agreement, then let the big banks themselves determine where they want to commit capital or how much to downsize.
“Higher capital solves a lot of problems,” Bradbury said. “We think we need to complete Basel III, then think about how much higher we need to go.”
Another issue closer to home is mutual-fund breakpoints. Firms have been hit with a number of fines for missing the correct discounts, but Bradbury says the complexity of calculating breakpoints makes the task near impossible, with multiple funds, share classes and schedules, and with broker-dealers not always aware of updated schedules.
“We need to address this with mutual fund companies … and simplify that whole task,” Bradbury said.
ASA members also have concerns about implementation of the JOBS Act, and the impacts of high-frequency trading on the markets.
Can they make a difference?
The BDA has been effective, ASA members say, and they hope that by creating the EDA and getting C-level executives involved, the ASA will have a larger impact than the BDA acting alone.
Bradbury senses an opening. “There’s growing recognition that there is a disparate impact” on smaller firms, he said. “We are encouraged that now on Capital Hill you hear more discussions about Dodd-Frank and [the impact on small] community and commercial banks.”
ASA members hope to bring that same sensibility to those who regulate the securities industry.