those who did not comply were harassed and penalized, even if they had acted in the best interests of investors.
Nor was the pricing convention the only unacceptable practice. The NASD failed to ensure the accuracy and fairness of quotation and transaction informationthe backbone of securities trading. It failed to apply certain rules to its members, and selectively enforced rules against others. The NASD allowed the interests of large market making firms to have undue influence over the conduct of its affairs and the regulation of its market.
The evidencegathered from hundreds of witnesses, thousands of hours of tapes, and more than a million pages of documentsshows that the NASD did not fulfill its most basic responsibilitiesand I quote from its charter: to promote just and equitable principles of trade for the protection of investors. On the contrary, American investors were hurtlarge and small, sophisticated and inexperienced, institutional and individualall were hurt by these practices.
The SEC Consent Decree Against The NASD
The most awesome and dramatic event since my last book has been the SEC consent agreement with the NASD. On August 8, 1996, the U.S. Securities and Exchange Commission released its findings that the NASD failed to enforce compliance with its own rules and the federal securities laws. The SEC simultaneously announced the institution of an administrative enforcement proceeding and the NASD's consent to the entry of an order censuring the NASD. The findings were set forth in an SEC Report of Investigation regarding the NASD and the Nasdaq market.
The SEC broke up a tacit conspiracy that artificially maintained excessive spreads between the bid and ask price on Nasdaq. The evidence was monolithic without fracture in its portrayal of broad-based market-maker collusion to rig prices and eliminate competition. Certain key officials at the NASD
