The National Association of Security Dealers Inc. in May posted on its regulatory website, under a disciplinary action form, the dispute involving UBS PaineWebber Inc. and its former consultant William Keith Phillips with the Nashville & Davidson County Metropolitan Benefit Board. The dispute involved investment consulting work and resulted in UBS PaineWebber paying a $10.3 million settlement to the board.
The information is posted under disclosure for Mr. Phillips. But what took the NASD so long to post this information? And why is it posted only for Mr. Phillips, who moved to Morgan Stanley Inc., and not UBS PaineWebber? NASD should have posted information about the dispute two years ago.
That was when a KPMG Investment Consulting Group audit of the Nashville fund revealed serious conflicts of interests and quantified their brokerage trading and investment cost to the fund in millions of dollars. That Nashville audit certainly met the standard of a customer complaint. Yet for the ensuing two years investors looking up the disciplinary histories of UBS PaineWebber or Mr. Phillips would have been in the dark about the dispute. Still, there is nothing posted under the firm, UBS PaineWebber, because the NASD has a different set of disciplinary disclosure requirements for firms than those for registered representatives.
The NASD and the Securities and Exchange Commission, which oversees the self-regulatory organization, must do whatever is necessary to see that such issues are disclosed right away, thus alerting investors of potential problems at firms or with individual brokers. Two years is too long for investors to be kept in the dark about possible problems.