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April 30, 1998

'Good Lord, Don't We All Deserve Better Answers?' So Says Ex-SEC Commish Edward Fleischman

By Staff Reports

An irate former Securities and Exchange Commission policy-maker has accused the agency of not giving helpful answers to ordinary regulatory questions from the trading community.

Edward Fleischman, an SEC commissioner from 1988 to 1992, told attendees at an equity-trading conference in April that it was "most surprising to hear senior SEC staff members bob and weave and dodge any straight answers to honest questions."

Fleischman told attendees at the conference, sponsored by the Security Traders Association at New York's Fordham University, that ambiguous responses made it difficult for buy-side and sell-side desks to properly handle trades between the best prevailing bids and offers.

"Ask [the SEC] if the firm is required to cross those orders in-house, and the answer will be an historical review, culminating in a reference to the principles enunciated in the limit-order display-rule adapting release," Fleischman said. "Repeat the question explaining that the trading desk won't be satisfied with a reference to the principles enunciated in the limit-order display-rule release, and the answer will be humorous, with explanations of the relevant dealer-examination modules."

Fleischman, now associated with the law firm of Linklaters & Paine, said the roots of best-execution obligations are decades old, and took on fresh light with the 1975 Securities Amendments Act.

Best-execution obligations became a hot subject as the SEC issued its 21(a) report in August 1996, and censured the National Association of Securities Dealers for not policing its own members.

But that has hardly helped traders get straight answers on best-execution obligations, Fleischman contends. "Good Lord," he added, "we deserve some straight answers, even if they are frightening or counterproductive or wrong."