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
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.