Thought Leaders I
 Restoring Confidence in the Market

NASD logoAs public confidence in stock markets has eroded, the NASD, the private-sector regulator that oversees almost all securities firms doing business with the public in the United States, worked with Wharton Executive Education's Custom Programs to create a rigorous, 3-year curriculum that helps financial service professionals and industry regulators work better together to meet investor needs.

"Our goal was to create a uniform standard of knowledge and analytical skills to help a broad range of securities professionals to meet their regulatory responsibilities," said Gary Tidwell, Executive Director and Vice President of Education and Training at NASD, which writes rules that help regulate the markets. NASD registers securities firms, writes rules to govern their behavior, examines them for compliance, and disciplines those that fail to comply. NASD also monitors all trading on the NASDAQ stock market and other selected markets worldwide. It conducts compliance examinations and takes disciplinary measures when needed. NASD was best known until recently as the owner of the NASDAQ, but it has decided to sell the exchange to concentrate solely on its core mission of investor confidence and market integrity.

Some 75 financial industry professionals have completed the NASD Institute-Wharton Certification Program. The 120 hours of coursework are divided into three phases, the first and last of which must be completed by attending sessions at Wharton. The second phase can be completed at other universities or schools through the NASD's education and training programs.

"The foundation of the program is a thorough grounding in security regulations," said academic director William Tyson, associate professor of legal studies, accounting, management, and law at Wharton. "We teach security laws and regulatory structures. In Phase I, I go through the two main securities laws, the 1933 statute and the Exchange Act of 1934. In Phase III we hone in on more specialized topics," Tyson said.

Industry and Regulators

One distinctive aspect of the program is that it brings together both industry professionals and regulators. "In designing the program, it became clear that one of the goals should be to improve interactions between corporate compliance officers and regulators," Tyson said. "We focused on teaching what is relevant to both parties. It was immediately clear to me after the first week that being in class together has helped these groups to see each other as real people. They often have quite adversarial relations with each other. So far, this program has proved to be a fertile ground for interaction among these groups."

The NASD-Wharton program has attracted regulators from the SEC, state, and national regulatory agencies and from commodities and futures exchanges. "It's a very high caliber of both compliance officers and regulators," Tyson said.

Sharing Nightmare Stories and Best Practice

Michael Wittenberg, a managing partner at the firm Wittenberg Priddy Blankenship, who offers securities through First Allied Securities, Inc., is one of the first 75 financial industry professionals to receive the Certified Regulatory and Compliance Professional designation through the program. He's found immediate and continuing practical benefits.

"It's made me more attuned to so many different regulatory issues," Wittenberg said. "Having regulators and other compliance professionals together in the classes allowed me to get a broader perspective. I heard real nightmare stories from other participants and how they developed the best practices as a result. They had the nightmares for me," he said.

He even stopped offering one type of product after hearing others in the class talk about their experiences with it. "We'd only done a few of these products before I took this program, but it was becoming all the rage in the industry. I just feel, after listening to regulators and others in the class talk about these products, that we could avoid a lot of headaches by not doing them anymore."

For Wittenberg, the effects of the program have been far-reaching. Since receiving his Certified Regulatory and Compliance Professional designation in 2001, he has been asked to serve on the company's Best Practices Board. This involves participating in monthly conference calls with heads of the legal, compliance, and supervision departments for all of First Allied branches in the United States. The sessions with Linda Fienberg, President of NASD Dispute Resolution, led him to pursue arbitrator status. He received his arbitrator number in May 2002.

"I began this program as a way to better serve my clients and brokers, since I believe no one in this industry can know enough about compliance. What I've seen since completing the certification is a positive ripple effect within my company as more people become aware of the nuances of compliance issues," he said.

Tough Standards

Professor Tyson, who also teaches at the University of Pennsylvania Law School, holds the NASD students to the same tough standards as his first-year law students. "I don't give them any slack," he said. "I don't use a lecture format; it's a dynamic process that depends on participants being involved in the discussions." An exam at the conclusion of each 5-day session — which must be passed to receive certification — also helps spur class discussions, he added. "What I hear from people after they've taken my classes is that they've become more rigorous in their thought processes," Tyson said. "I keep them on their toes."

Wittenberg concurs. "He's got the Socratic method down better than Socrates," he said. "Bill Tyson was intimidating and imposing. We loved him. I learned a lot in his classes. His knowledge of both business and law is outstanding."

Sandro Ramos, International Compliance Director at Charles Schwab in Miami, received his certification in 2002. He has found the knowledge invaluable in his job of providing support for Schwab's overseas clients, primarily in Latin America and Europe. "I help our international brokers to better understand how U.S. securities rules and regulations affect offshore clients' investments. I also provide guidance and direction in due diligence processes and ‘know your customer' rules and suitability issues," he said.

Ramos felt the structure and content of the NASD Institute-Wharton Certificate Program was outstanding. "Schwab offers ongoing training in the area of compliance since it is a very dynamic industry. The curriculum in the Wharton program is in-depth and gives analysis of current case studies. I still use the reference materials we were given, and other Schwab employees — from around the world — have been asking me about the program," he said.

He found being in the same classroom with industry regulators has improved his communication skills on the job. "The compliance industry environment can be confrontational at times; rules are constantly being challenged, or regulators are asking for more clarification," he said. "Now that I'm keeping in touch with some of these regulators I met in class, it's changed the way I communicate with them. I now understand their perspective much better," he said.

NASD-Wharton Certification Program
If you have any questions about this program, please send an email to dunworth@wharton.upenn.edu.

    

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