Commentary

Joseph Cordahi
Traders Magazine Online News

Rising Rates and Vol Give Funds Food for Thought, but a Menu Overhaul Isn't Required

Due to a combination of pressure to deliver greater returns and a prolonged period of low rates, the investment world is experiencing a major shift requiring asset managers to rethink their strategies.

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April 1, 2003

Firms Face SEC Best Execution Actions

By Gregory Bresiger

The Securities and Exchange Commission is about to launch a series of enforcement actions against firms that aren't meeting best execution standards, according to people familiar with the situation.

One published report said the SEC is in "a get-tough mode" with broker dealers that do not use order routing information to provide best execution.

Tough Steps

Lori Richards, director of the Office of Compliance Inspections and Examinations, said the SEC is going to become "very aggressive" on best execution enforcement.

A former SEC official said that the agency generally had not been forceful in this area.

"That's because best execution is a very difficult kind of enforcement action," Mark Borrelli, a former assistant regional director in enforcement for the SEC, told Traders Magazine.

Borrelli said that he doesn't expect to see many best execution only enforcement actions. He predicts that they will be coupled with other potential violations such as conflict-of-interest charges.

"Best execution is an area that the SEC has traditionally shoved into the background," Borrelli said.

The Problem

Best execution standards are often nebulous, many trading industry executives have charged. "The standard requires the regulators to recreate a market," Borelli said. And that, he conceded, is a very difficult exercise.