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Wall Street & Technology: Blog
subscribe October 25, 2006

Lek Securities Battles NASD Over OATS Regulation

Ivy Schmerken, Wall Street & Technology

Lek Securities is taking the National Association of Securities Dealers (NASD) to court to counter charges that the broker-dealer did not submit trade information required for compliance with the Order Audit Trail System (OATS). The trial was scheduled to begin today.

Lek is challenging the NASD charges on the basis that OATS is illegal and improperly structured, according to a release issued by the institutional direct-access broker-dealer.

Lek is questioning the enforceability of OATS, contending the regulation fails to comply with the Paperwork Reduction Act (PRA), which was deliberately amended in 1995 to ensure that federally sponsored programs such as OATS are subjected to a cost-benefit analysis to determine whether the regulations result in a net public benefit.

According to the release, Lek will argue that the requirements of OATS, which track information on date, time, size and other information for every trade, not only represent an incredible cost and time burden, but are redundant with other regulations tracking the same information, arguing that this results in little, if any, public good.

“There is scant evidence that the enormous cost and burden of OATS compliance and the unwieldy amount of data it generates protects the public,” stated Samuel Lek, CEO of Lek Securities.

“OATS functions as an unjustifiable hidden tax on the business of NASD member firms, hitting small firms the hardest, with repercussions that trickle down as far as individual investors,” stated Lek in the release. “We are confident in the strength of our case and believe the NASD’s much-needed reform will result in open, safe and efficient markets,” he further added.

Beyond this litigation, Lek is seeking to impact change in the design of NASD regulation by joining the organization. He is running for a seat on the NASD’s National Adjudicatory Council, New York City District 10 under the sponsorship of the Financial Industry Association (FIA).

Posted by Ivy Schmerken at 06:04 PM

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