Mark A. Belnick is one lawyer who doesn't like being typecast.

He has investigated illicit arms sales to Iran as deputy counsel to the U.S. Senate Iran-Contra Committee. And he defended investment banker Michael Milken from civil lawsuits stemming from his dealings at Drexel Burnham Lambert Inc.

No less important, however, has been Mr. Belnick's recent role as chief counsel to the so-called Rudman Committee, which examined the National Association of Securities Dealers and recommended sweeping changes in its structure.

The independent committee, headed by former Sen. Warren Rudman, was convened by the association in the wake of criticism that its structure and, in particular, its regulation of the Nasdaq market, favored the largest member firms.

Last month, in keeping with the committee report, the association's board of governors approved the formation of separate subsidiaries to manage the regulation of the country's broker-dealers and to run the over- the-counter market.

Mr. Belnick, 49, a senior partner in the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison, led a team of investigators that interviewed nearly 200 people and examined mountains of documents.

In a recent interview in his modest office in midtown Manhattan, Mr. Belnick offered his views on the committee's findings and the effects of the coming changes at the NASD on bank broker-dealers.

Q.: How challenging is the NASD's task in policing the broker-dealer community?

BELNICK: It's enormous. Ironically, one of the reasons the NASD was established was because the government itself considered regulating the profession as it existed in the 1930s, in a far smaller form, as too big a job for the government.

Last year alone, the NASD conducted some 20,000 market surveillance inquiries, over 10,000 disciplinary examinations, and concluded nearly 1,000 disciplinary actions.

Q.: Given that burden, how fair and effective is NASD enforcement today?

BELNICK: We looked to see whether there was something in the NASD regulatory process that would reveal any systemic bias or would make the system inherently ineffective. We didn't find any of that.

Q.: The Rudman report recommended, however, that the NASD increase resources devoted to enforcement. How much more is required?

BELNICK: The committee said that whatever it takes is what the NASD ought to spend. Our view of NASD's finances convinced the committee that everything that ought to be done can be done without increasing membership assessments.

Q.: Was there anything in particular that underscored the NASD's resource crunch?

BELNICK: Customer complaints. The data we looked at showed that of the customer complaints that NASD received in 1994, roughly only 2% of them materialized into disciplinary actions.

We compared that with other self-regulatory organizations and what state regulators were telling us, and it persuaded the committee that the 2% number, even on its face, is very, very low.

Q.: What's behind that figure?

BELNICK: The committee believes that one of the reasons that number is so low is that the field examiners have been stretched thin.

They need more (field examiners). I don't think it requires a massive introduction; we're obviously not talking about hundreds.

Q.: Did you find the need for more resources in headquarters?

BELNICK: At the holding company level, there will be a new office of internal review, which will serve as an in-house inspector general. An organization the size of the NASD needs to have that kind of internal function for disciplining itself.

That will cost money as well, but in the end it will save the NASD, we think, significant grief and misunderstanding.

Q.: Were there other enforcement areas that suffered because of a shortage of resources?

BELNICK: Another example was the review of the district offices themselves. That function has been moribund for at least the last two years. Since so much of what the NASD does takes place at the district level, nothing could be more important in terms of internal administration than for the district offices themselves to be regularly and efficiently audited by the national office.

Q.: How big a problem is that lack of routine oversight?

BELNICK: It could have become a very significant problem.

The fact that the committee was empowered at this time and not later may well have avoided the system from really cracking.

Q.: Can you explain the committee's recommendation that NASD do more to coordinate enforcement with other regulators?

BELNICK: What the committee specifically has in mind is that senior officials of the SEC, states, and major self-regulatory organizations would (formally) talk about the national disciplinary agenda for the year.

At a second conference (six months later), the same group would look at where it has been and whether new issues have developed.

If that were done year after year, then hopefully some of the current issues between the SEC and NASD would have been avoided.

Q.: Can bankers expect more NASD examinations as a result of the changes?

BELNICK: Probably.

Q.: A lot more?

BELNICK: I don't know what a lot is. But there will be increased examination activity, and not only at banks.

Just by dint of adding the resources to conduct more examinations and to react in a more timely fashion to customer complaints, there will be an increased level of regulatory activity.

Q.: How will the implementation of the report change the division of labor at the NASD between the staff and the volunteers from the broker- dealer membership?

BELNICK: The tradition of keeping the professional staff relegated primarily to servicing the volunteer leaders has permeated the organization. The symptoms of that have been the frequent inability of the NASD to move on issues that the market has clamored for.

Reducing the time that volunteer leaders spend on administration would make it possible for volunteers from smaller broker-dealers and smaller banks to participate.

Q.: Will the reorganization make participation more appealing to the member broker-dealer institutions?

BELNICK: Overall, if these reforms succeed in giving the NASD a much- needed boost in the public eye, that status ought to make it more attractive for banks to send their best people to NASD governing organs and get involved.

Certainly, heavy negative publicity is not a magnet for that kind of involvement.

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