National Association of Independent Broker/Dealers

Princeton Junction, NJ—October 28, 2009—Small investors and their financial advisors would bear the brunt of proposed legislation in Congress that would substantially increase the auditing costs of their small independent broker/dealers and drive many of these firms out of business.

Such is a warning sounded by the National Association of Independent Broker/Dealers (NAIBD) ever since the introduction of H.R. 1212, an amendment to the far-reaching Sarbanes-Oxley Act of 2002 proposed by Rep. Paul E. Kanjorski (D-PA) earlier this year.

NAIBD board members began meeting with various members of Congress to propose solutions to the issues raised in the new legislation, including members of Rep. Kanjorski’s staff, Rep. Scott Garrett (R-NJ), and other members of Congress who have expressed concern for issues affecting small businesses. NAIBD Chairman Steve Distante recently continued this initiative with a visit to Rep. Nydia Velázquez (D-NY), chair of the House Small Business Committee last week.

In response to a strong outcry from NAIBD and other industry organizations, Congressman Garrett has recently brought forth the Garrett Amendment that would best focus regulatory attention and resources toward rooting out potential fraud and investor scams like the Bernard Madoff scam. NAIBD has expressed further support by contacting key members of Congress to encourage them to vote for this new measure.

Without the Garrett Amendment, H.R. 1212 would require these small firms to be audited by the Public Company Accounting Oversight Board (PCAOB), whose policies and procedures are geared to auditing large, publicly-held broker/dealers. This would increase the small broker/dealers’ costs by 500 to 1,000 percent, according to the NAIBD. These costs would likely be passed on to investors and their financial advisors.

Distante commented on the issue, saying small non-public securities firms “cannot afford the exorbitant audit expenses that would result from H.R. 1212” and predicted “widespread business closures,” particularly in areas outside of major financial centers, “where their services to Main Street are especially important.”

Distante noted that the financial statements of these firms are already reviewed by the Financial Industry Regulatory Authority (FINRA) on regular cycles throughout the year, so the audited data that is the subject of H.R.1212 is “old news.”

What’s more, Distante said “audits of small, non-public firms which never hold customer cash or securities are meaningless to investors. Making them more costly and complex does nothing to enhance investor protections.”

NAIBD works together with Independent Broker/Dealer owners and principals, industry product and service providers, and the SEC, FINRA and state regulatory organizations to improve the securities industry as a whole. The association recognizes the needs of the industry and its members by hosting national meetings, rapidly distributing critical regulatory details and product/service offers, supplying feedback to SEC, NASD and state regulators as well as offering its Fall and Spring Symposia. For more information, please visit www.naibd.org.