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Many of these firms use big-name clearing houses to carry out their activities. The clearing firms' policies and procedures regarding these smaller firms' practices frequently amount to a blind eye, or worse. Small brokerage firms aggressively boast of their relationship with well-known larger firms -- almost to the point of stating that they are partners. In fact, trade confirmations and account statements are sent directly to customers with the clearing firm's name prominently printed on the top. Yet when customers cannot get their brokers to sell a stock and turn to the clearing firm itself for assistance, they are met with a deaf ear.
Micro-cap brokerage firms can only exist by processing their transactions through the road provided by the clearing firms. Existing regulatory "speed bumps" to prevent fraud have proven ineffective. It is time to re-examine the responsibilities and obligations of clearing firms in light of the widespread fraud involved in the telemarketing of low-priced stocks. The "speed bumps" may have to be replaced with regulatory "stop" signs.
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