This news report summarizes the testimony of Alfred R. Berkeley III before the Senate Banking Committee (July 10). Embedded in the report is a link to his complete testimony.
Here is their problem, according to the full testimony. The National Association of Securities Dealers (NASD) has 5,500 securities firms that operate 60,000 branch offices. They employ 535,000 registered securities professionals.
Impressive? Terrifying. What he did not discuss is the number of noncompliant computers, right down to desktops, that all these branch offices use. If they are not compliant, how will they interface with the mainframes, assuming the mainframes are (briefly) 2000-compliant?
He did say this much: "Not only must we ensure that our systems work correctly within the NASD and its subsidiaries, they must also integrate with our vendors and subscribers and other members of the securities industry." Ah, there's the rub! Well, another rub among many. He neglected to mention banking, telephones, and public utilities.
NASD itself has two main computer systems, 1,000 staff, 134 application systems with 18,500 programs for a total of 16.6 million lines of code. These run on six major platforms using eight major languages.
Cost of repair: $20 million.
The system is one-third compliant today.
What is likely to happen if they don't get all this fixed by 2000? ". . . applications will continue to process, producing inaccurate data and information. For example, erroneous calculations may impact billing invoices, loan interest payments, or depreciation schedules."
Now, if he's correct, when the public figures this out, would you expect the typical investor to sit there and bear with these errors? Or will he call his broker and say, "Sell!"
I know what I think he will do. And he will get a busy signal if he's not at the head of the line.