The Securities and Exchange Commission today charged 37 brokerage firms for failing to report the status of their Year 2000 technology problem preparedness as required by the federal government, the commission said.
The enforcement actions were brought in conjunction with the National Association of Securities Dealers Regulation (NSDR) to insure the firms comply with their Year 2000 disclosure obligations. As part of these joint efforts, the association also announced today that it has brought actions against 59 of its members for late filing of the necessary information.
"Customers of brokerage firms have the right to know what steps their brokers have taken to address possible computer failures that could affect their investments," said SEC chairman Arthur Levitt in a statement today. "The commission takes the Year 2000 computer problem very seriously and has required broker-dealers to do the same."
Nineteen of the 37 firms charged agreed to settlement offers, which consist of a cease-and-desist order, a censure, and a civil penalty. Fines from the settled cases total $235,000, according to the commission.
"These are the first cases the Enforcement Division has brought concerning Year 2000 disclosure," SEC enforcement director Richard H. Walker said in a statement. "We will continue to be vigilant in policing Year 2000-related disclosure and will not wait until the new millennium to bring additional enforcement actions."
The problem, often called the millennium bug, is rooted in the way dates are recorded and computed. For the past several decades, systems have typically used two digits to represent the year, in order to conserve memory. With this two-digit format, however, the year 2000 is indistinguishable from 1900, or 2001 from 1901.
The SEC's rules required firms to file form "BD-Y2K" with both the Commission and the firms' appropriate self-regulatory organizations by August 31, 1998. The Commission brought these actions against broker-dealers that failed to file all or part of this form.