REBUILDING FOR THE FUTURE
Remarks of Marc E. Lackritz
President, Securities Industry Association
SIA Annual Meeting
Boca Raton, Florida
November 8, 2001
I. Welcome / Moment of Silence / National Anthem
Good morning ladies and gentlemen, and welcome to SIA's 2001 annual meeting. My name is Marc Lackritz and I am President of the Securities Industry Association.
The securities industry was among the hardest hit by the terrorist attacks of September 11th. Securities firms lost almost 1,200 precious and talented people, over 700 of whom worked for SIA member-firms, in this incomprehensible tragedy.
Please stand for a moment of silence in remembrance of those who were lost.
Thank you.
II. Industry Resilience
Our annual meeting here at Boca has usually been a celebration of the success of our industry, our customers, and our economy. We've celebrated new market highs, record amounts of capital raised, and the continued growth of our business. But not this year. This year, we recognize, appreciate, and celebrate our industry's incredible resilience and resolve in the aftermath of the September 11 attacks. The securities industry responded in a way that not only gives us great pride, but demonstrates the strengths that have made America's securities firms - our community, our industry, our markets - the financial and economic leaders of the world. Unlike years past, our pride is not in our numbers. Our pride is in our resilience - our tenacity and our focus - and it serves as a reminder that the most important things in life can't be measured.
Just minutes after the catastrophe, for example, brokerage firms, markets, regulators, industry associations, and telecommunications and power providers along with the police and fire departments, city employees, and countless others pulled together to begin the painful job of rebuilding. Ours is a story of tireless efforts, of marathon days running into endless nights, of ingenuity, jerry rigging and creativity, and of compassion, cooperation, and commitment. All the acts of sheer determination and the tales of refusing to be crippled by pessimism and despair are too numerous to tell you this morning. But here are a few that speak volumes about the American spirit:
- Verizon's headquarters at 140 West Street would surely have blown up when the Seven World Trade Center building collapsed onto it had one brave individual not stayed behind to shut down the power and gas supply. Much of the building - which contained a huge switching facility with 4.5 million data circuits and 300,000 voice customers - is now back in service.
- Although more than 30,000 workers from about 45 firms were displaced, numerous firms that were spared damage - including Chairman Mark Sutton's UBS Paine Webber and many of our Board members' firms - immediately volunteered office space, personnel, computer capacity, and other resources to those in need.
- A key utility for our industry, SIAC played a pivotal role in restoring our industry's infrastructure and operations. SIAC worked on a case-by-case basis to re-establish connectivity for all the firms they could contact, and all those firms were "up and running" within six days following the attacks. SIAC also made substantial system configuration modifications to enable the AMEX - which had suffered heavy damage - to trade equities on the NYSE floor. And, in a mere four days, SIAC practically moved mountains to build a complete options trading facility at MetroTech in Brooklyn.
- And, in an industry-wide Herculean effort, thousands of securities industry operations and technology workers toiled around-the-clock in the most difficult and awkward circumstances so that the debt markets could trade on September 13 and the equity markets could re-open on September 17.
III. Industry/Staff Acknowledgements
In addition to thanking our thousands of volunteers, I want to express my deep gratitude to my able and dedicated colleagues on the SIA staff. In the aftermath of September 11, when our entire New York staff evacuated our offices after many actually witnessed the second jet plow into the World Trade Center's southern tower, our staff continued to function. Operating from homes linked by conference calls - and then from a back-up facility in New Jersey - John Panchery, Phyllis Cassar, Al Dashevsky, Ken Morrison, Carl Morrishow, and Heather Bradfield worked tirelessly to re-establish the technology that made SIA a central clearinghouse for the industry. Our Director of Human Resources, Pam Faber, worked diligently to stay in contact with our landlord and provide strong support to our staff. Our D.C. office became SIA's "headquarters" during the critical few days after the attacks. Jim Spellman and his corporate communications team handled an avalanche of media calls and worked with CNBC to provide information to displaced industry employees.
Bernie Madoff deserves special recognition for not only taking in several displaced brokerage firms, but also for providing refuge to the New York contingent of our Office of General Counsel.
Amazingly, Rob Gannon, Melanie Gaul, and her entire conference services team even managed to pull off our Small Firms Conference and Exhibit a mere month after the attacks. Presiding over this diaspora with unflappable calm, wise judgment, and experienced perspective was Don Kittell. Don organized and participated in daily conference calls on operations, infrastructure, and the re-opening of the markets, while Stuart Kaswell and our lawyers organized regulatory calls with the SEC, SROs, and the exchanges.
Most importantly, almost every one of our entire staff showed up for work - at home, at our back-up facility, or at our New York or Washington offices, and did their jobs in often difficult physical conditions after suffering terrifying, traumatic personal experiences. Thank you all so very much.
The support and leadership of the SEC and its new chairman, Harvey Pitt, were essential to protecting investors and ensuring the integrity of our markets. The entire industry showed an extraordinary level of cooperation, coordination, and generosity previously thought by many outside our industry as impossible in this competitive, tough business. But as our former Chairman Buzzy Krongard would say, "Anyone can sail with the wind; the real pros can also sail into the wind."
And although he might live in Austin, Texas, Mark Sutton certainly knows how to sail into the wind. After the twin towers collapsed, Mark was on the phone immediately - offering space, calling meetings, and ensuring that SIA continued to serve the industry. SIA has had a truly extraordinary year under Mark's steady leadership. Mark, on behalf of the organization and all my colleagues on the staff, thank you. [Lead applause.]
In that same spirit, we're all looking forward to working with Allen Morgan in the coming year. If Allen's chairmanship is anything like what he's done in raising money for SIA's Political Action Committee this year, we will undoubtedly have another superb year.
I also want to thank Jim Brinkley for his wise counsel during this difficult time. Jim has served on the SIA Board since 1994, during a period of the most dramatic change in the securities industry since the mid-70s. Thank you, Jim, for your guidance and commitment to SIA.
I'd also like to thank the chairmen, staff advisers, and hundreds of individuals who serve on SIA's Operations, Decimalization, Federal Regulation, Government Representatives, Ad Hoc Research Analyst, and Bank Retail Broker-Dealer committees. Each of these committees had particularly stellar achievements, and we all owe them a large debt of gratitude for their very hard work this past year.
IV. Industry Results
Up until this year, our industry had turned in a decade of phenomenal results in virtually every part of the business. In spite of a very difficult third quarter, and a projected weak fourth quarter, we've still managed to turn in a very respectable performance this year. We'll raise a record $3.2 trillion for U.S. business, easily shattering 1999's previous record. And despite third quarter declines in both debt and equity underwritings, we've already surpassed last year's U.S. corporate underwriting totals. The IPO market, however, ground to a complete halt in September - the first month since December 1975 in which there were no IPOs. This year's estimated IPO proceeds of $36 billion are less than half last year's record total.
Industry revenues and profits were also down this year. Domestic revenues are projected to be $197 billion, down 20 percent from last year's record. Full-year domestic pre-tax profits are expected to drop 47 percent from last year, but that will still rank as the industry's fifth-most profitable year.
Investors, too, are suffering from a second consecutive year of negative returns. Through October, Nasdaq had tumbled 32.5 percent, the S&P 500 fell 20 percent and the Dow Jones average declined 15 percent. And yet investors have shown remarkable resilience, proving that they too can sail into the wind. Our customers generally remained calm, taking a wait-and-see attitude when markets reopened September 17. Despite steep, initial drops in equity prices, individuals were actually net buyers of equity securities in the week the markets reopened. That helped to offset some strong net selling by foreign investors and domestic institutional investors, and by early October, the market averages returned to their pre-September 11 levels.
V. SIA Accomplishments
In spite of the attacks and the market and industry downturn, SIA had an outstanding year. Chairman Mark Sutton will discuss some of our main accomplishments - such as the enactment of broader retirement savings incentives and pension reform, the conversion to decimal pricing, and research analyst best practices - but we've had many smaller victories as well.
Our industry should be very proud of the role we played in cooperating with Congress and the Administration to draft efficient and effective legislation to combat money laundering. We remain committed to assisting federal regulators and law enforcement officials in tracking and cutting off the flow of funds to terrorist organizations in any way we can.
SIA was also instrumental in the implementation of the Gramm-Leach-Bliley Act. We provided guidance and advice to member-firms as they developed policies to comply with new federal privacy disclosure requirements by the July 1 deadline. And we spent an enormous amount of time in the state legislatures to defeat or modify legislation that would have superseded GLB's tough privacy provisions, highlighting the problems that would result if each of the 50 states were to enact its own privacy regulations.
Our work to obtain exemptions from telemarketing bills in the state legislatures was also fruitful. In a similar vein, SIA helped modify overly broad federal legislation designed to severely restrict so-called e-spam, or unsolicited commercial email. In advocating a narrowly tailored solution, we sought to preserve the many benefits of unfettered communication while eliminating the nuisance of e-spam.
We also made significant progress on legislation to reduce the fees levied on securities transactions and registrations, while providing pay parity for the SEC, enabling it to continue to attract and retain the most highly qualified and competent employees. We're still optimistic that a compromise, bipartisan bill will be sent to the President for his signature before Congress adjourns for this session.
Acting as project manager on efforts to achieve straight-through processing and T+1, SIA made significant progress on many of the milestones outlined in our May 2001 project analysis. We also moved the targeted conversion date for T+1 back a year until June 2005. This delay will enable firms to complete the substantial systems development required for straight-through processing, while also meeting other critical technology needs, particularly in light of the September 11 attacks. Our experience in September reinforces the industry's need for straight-through processing and the eventual elimination of manual processing of trade information and the physical movement of check payments and securities.
We have also been working together with the Futures Industry Association to assist regulators and the exchanges in establishing the initial framework for trading futures on single stocks and narrow indices. The tremendous dislocation that occurred as a result of the September 11 attacks as well as the complexity of establishing rules for products with both equities and futures characteristics, however, led us to seek a modest delay until April 1 to begin trading single-stock futures. We appreciate the Congress' and regulators' favorable responses to our request.
I am also proud to announce that SIA has never been financially stronger - this year, with our highest operating profit ever, we met our goal of having six months operating income in reserve. We have never been better positioned to address the many new, complex challenges our industry faces as we continue to change technologically and recover from an economic downturn and the impact of the terrorist attacks.
VI. Conclusion
The most important lesson from this past year is that we've shown the world what an extraordinary collection of people make up this industry. Our lost colleagues are irreplaceable. We still mourn their loss, miss their energy and enthusiasm, and grieve for their loved ones. But we have not been bowed. We have not been hobbled. Our markets endure, and new opportunities abound. And your spirit and resilience continue to lead the way in our mission to fuel economic growth, fund progress, and fulfill dreams.
Thank you very much.
