In today’s online issue of Bloomberg.com, the financial journalist Susan Antilla quotes Ted Eppenstein, the securities arbitration lawyer, on the precipitous decline in securities regulatory fines and enforcement actions in 2006 by the NASD, NYSE and SEC.

Citing reports that FINRA (the Financial Industry Regulatory Authority, which combined the NASD and NYSE regulatory and securities arbitration functions in summer 2007) intends to promote the idea of “principles-based” regulation rather than relying on a rules-based regulatory paradigm, Mr. Eppenstein stated that such a regulatory shift would have a negative impact on investors generally, to say nothing of investors who are forced to fend for themselves in securities arbitration at FINRA.

The Bloomberg piece reported as follows:

“It may sound good on paper, but Eppenstein says investors in real-life situations (situations, perhaps, like mandatory arbitration) are best served by hard rules. When brokerage firms can defend themselves by saying they have complied with some amorphous code, it gives them more “wiggle room” to defend themselves, he says.

“When the rules are fuzzy and based on principles, “good intentions will get you off the hook” if you’re a Wall Street thug under the hot lights, Eppenstein says. How will we know if Eppenstein’s fears become reality? Keep watching to see if those enforcement numbers continue going down. And keep listening for regulators who tell you their success shouldn’t all be measured by narrow things like statistics.”

For more on the effects on securities arbitration and public investors you can reach us directly by phone or email listed on this Securities Fraud Hotline site.