CONTENTS II. CURRENT Status of tHE SMALL BROKER-DEALER INDUSTRY. A. Characteristics and Functions of the Industry... B. The Problems Confronting Small Broker-Dealers Today. III. THE PLIght of the SMALL BROKER-DEALER_. A. The Burden of Federally Engendered Paperwork.. II. CURRENT STATUS OF SMALL BROADCASTERS. A. The Composition of the Industry, the Communities It Serves, and the Nature of Its Services. - B. The Current Financial Position of the Small Broadcaster___ III. THE BURDEN OF FEDERAL PAPERWORK AS REVEALED BY THE A. Statement of Senator Thomas J. McIntyre introducing Senate Resolu- B. Announcement of a Program of Implementation Regarding the "SEC Advisory Committee Study on Broker-Dealer Reports and Registra- tion Requirements,' Securities Exchange Act of 1934, Release No. 10612/January 24, 1974; Securities Investor Protection Act of A. Statement of Senator Thomas J. McIntyre introducing Senate Resolu- tion 83, from the Congressional Record, Vol. 119, No. 42, March 19, B. Statement of Dean Burch, Chairman, Federal Communications Commission, Before the Subcommittee on Government Regulation, Senate Select Committee on Small Business, February 7, 1973------ THE FEDERAL PAPERWORK BURDEN MAY 28, 1974.-Ordered to be printed Mr. MCINTYRE, for Mr. BIBLE, from the Select Committee on Small Business, submitted the following REPORT PART I: SMALL SECURITIES BROKER-DEALER I. INTRODUCTION During the first session of the 93rd Congress, the Subcommittee on Government Regulation of the Senate Select Committee on Small Business, chaired by Senator Thomas J. McIntyre of New Hampshire, held additional public hearings on the growth of the Federal paperwork burden and its effect on small business. On July 12 and 23, 1973, hearings were conducted in Room 4200 of the Dirksen Senate Office Building, in which the effect of regulatory agency requirements on small independent securities broker-dealers was investigated. At that time Senator McIntyre noted the concern of small brokerdealers as expressed by numerous letters of complaint which had reached his office since the subcommittee initiated its first hearings on hardships caused by the paperwork burden. The hearings, he added, were called to determine the extent of this hardship and to explore possible reforms by which the burden could be relieved.1 The committee heard testimony offered by witnesses representing the entire spectrum of the securities industry, including Mr. Raymond W. Cocchi, president of the Independent Broker-Dealer Trade Association, Mr. Gordon S. Macklin, president of the National Association of Securities Dealers, the chief representative and self-regulatory agency of the securities industry, and Mr. Lee A. Pickard, director of Market Regulation for the Securities and Exchange Commission. In 1 U.S. Congress. Senate. Select Committee on Small Business. Subcommittee on Government Regulation. The Federal Paperwork Burden (Small Securities Broker-Dealers Requirements) Hearings, Ninety third Congress, First Session, July 12 and 23, 1973. Washington, U.S. Government Printing Office, 1973. Part 4, 571 p. Hereinafter this document will be cited as FPB Hearings Part 4, Introductory Statement, p. 1379. addition to the testimony of these and other witnesses, a number of related exhibits were presented along with an appendix of letters forwarded to the committee by concerned broker-dealers. The purpose of this report by the Select Committee on Small Business is to analyze the data and testimony submitted to the subcommittee, and to assess the current status of the small independent broker-dealer nationwide. It makes specific recommendations to reduce and simplify the heavy burden of paperwork presently imposed by both Federal regulatory agencies and the National Association of Securities Dealers, the major organ of self-regulation within the industry; the ultimate purpose of the recommendations is to restore the strength and viability of the small independent broker-dealer so that he may continue to render his valuable services to the Nation and his community. II. CURRENT STATUS OF THE SMALL BROKER-DEALER INDUSTRY A. Characteristics and Functions of the Industry The American securities industry includes a variety of firms, varying in size and function, ranging from giants such as Reynolds Securities headquartered in New York City to tiny units such as James C. Butterfield, Inc., in Jackson, Michigan. The number of securities broker-dealers fluctuates each year with the entry of new firms and the departure of others, and, although the number has steadily drifted downward since a high reached in the 1960's, figures distributed by the National Association of Securities Dealers, showed a total of 5,224 dealers as of June 30, 1970. It was further estimated that fully 70 percent of the firms registered at that time could be described as small businesses on the basis of their size and complexity of operation. This gives an approximate total of between 3,600 and 3,700 small broker-dealers. Certain characteristics of these small dealerships were revealed in the hearings, both through the testimony of various witnesses and by written statements and exhibits presented in the record. Most small securities dealers employ ten or fewer people, including sales personnel and secretarial support-the "back office staff." They are concentrated primarily in small urban areas whose size does not often attract the larger nationwide firms; many small dealers operate from a single office, although a substantial number also have one or two branches. Almost uniformly, they are not members of the New York or American Stock Exchanges, and a number are not affiliated with even the regional exchanges. One consequence of this is that certain services performed for customers, which involve primarily transactions of securities listed on the major exchanges, are of necessity routed by the small dealers through firms holding membership on a major exchange.3 Although some 150 major firms generate 70 percent of the Nation's securities business, the small firm also plays a vital, if different, role in the economic life of the United States. Mr. William McChesney Martin, former Chairman of the Board of Governors of the Federal Reserve System, accurately assessed the importance of the small 2FPB Hearings, Op. cit., Part 4, p. 1449. FPB Hearings, Op. cit., Part 4, p. 1458. |