THE ROCKY MOUNTAIN NEWS "Trends", SUNDAY, DECEMBER 15, 1974
THIS IS A MEMORIAL WEBSITE. THE ARTICLE ON THIS PAGE IS REPLICATED VERBATIM FROM THE ORIGIANL ARTICLE IN POSSESSION OF THE RAY GARRETT FAMILY.

"Demise of fixed rates 'assured'"
by Pete Chronis
News Staff

The chairman of the Securities & Exchange Commission (SEC) doesn't see any likelihood of the commission's being "talked out" of eliminating fixed rate brokerage commissions.

Ray D. Garrett, Jr., who was in Denver to address the Rocky Mountain Chapter of the Financial Executives [sic] Institute last week, said that although hearings currently under way on "fixing" the rates, he believes that it is extremely unlikely that the SEC will waver from its resolve to change the rate structure.

Asked if the brokerage industry is likely to challenge the new rules in court, Garrett replied, "I would expect they would. They would have perfect right to test it out in court. I will not be surprised if that occurs."

Garrett went on to say that he doesn't think there is much chance of the new rules being vacated on grounds of the SEC's exceeding its authority or of acting arbitrarily.

Garrett was asked if the composite quote system for the stock markets, which is seen as ultimately including all stocks traded, might not cause some confusion among investors as to the type of company in which they are investing.

"I think that we'll have to be sure that it does not," he answered, adding that the composite tape system already is in existence.

This is a two-level tape, he explained, with the first level listing just the New York Stock Exchange. The second tape is the American Stock Exchange. This system, he said, reports the trades when they occur.

"The quote system has yet to be designed," Garrett noted, although he added that some sort of identifying symbol will be needed to designate which market the stock is being traded on.

As for one stock market, Garrett commented "I don't know how far down the road to speculate on that."

He explained that what the SEX is trying to achieve is to simultaneously expose all the major market makers in a given security: which he said doesn't necessarily involve merging all the stock markets.

Electronics would play a key role in a central market system, according to Garrett, and the hardware hasn't really been produced yet that will allow orders to be handled easily.

Garrett said that if the SEC encounters any difficulties with regard to gold "fund" activities such as contracts when it becomes legal to trade in the metal Dec. 31 will "depend in part, at least, in how efficient our enforcement action on silver and gold coins has been. If the message got across, people will not try to play the same game with gold."

He explained that the SEC authority in the gold market will be only in those areas in which securities are involved. Futures trading in gold, he said, will be handled by the new Commodities Trading Commission.

Investment contracts which involve gold, as they now involve silver, however, will be subject to regulations for proper registration and proper disclosure, Garrett added.

The SEC chairman said that several government agencies have cooperated to produce what they call "The Fourteen Gold Rules" to help the public avoid being defrauded in the gold trade.

"The way people get taken in these things makes me doubt it'll do much good," he added glumly.

Educating the public is about the only way to avoid those frauds Garrett sapd [sic], noting that it will be easy to cheat on the content of the gold.

The SEC chairman noted that many of the shady operators who have been pushed out of the securities industry and who have taken not of the public's disenchantment with the equity market, have suddenly shown up in silver.

"These are the con artist types trying to stay one step ahead of the sheriff," Garrett said.

The growing participation of banks in the function of brokers is one problem which Garrett said will have to be faced not only by the SEC by also by Congress.

While banks have been allowed to act as "brokers of accommodation" for the clients under the Glass-Steagall Act of 1933, Garrett said they have not in the past been advertising the service actively nor have they been using the function as a means of gaining depositors.

"When banks starts automated investment programs, this caused alarm among the regular broker-dealers, whose business was falling off," Garrett said.

Garrett observed that the broker functions of some banks appear to go "beyond the intent" of the law when the service is promoted by advertising.

* See scanned Article

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