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What is the Securities Industry and Financial Markets Association®?

John Lister
John Lister

The Securities Industry and Financial Markets Association® is an industry trade association representing securities firms and associated companies. It currently represents firms in the United States and Hong Kong, but previously represented European firms as well. Both the image and membership of the association took a severe knock during the 2008 credit market crisis.

The association has undergone several administrative changes. It was formed in 2006 through a merger of the Bond Market Association and the Securities Industry Association. In 2009, it ditched its European operations, which were taken over by the London Investment Banking Association. In 2010, the American Securitization Forum, which had operated under the oversight of the Securities Industry and Financial Markets Association®, chose to become a fully independent body.

Man climbing a rope
Man climbing a rope

The biggest challenge to the Securities Industry and Financial Markets Association® came in 2008 with the credit crunch. This was the result of securities products based on mortgage debts becoming too complicated, mixing together mortgages from borrowers with different default risks, meaning investors could not easily tell how safe or risky a particular product was. When defaults among lower-income borrowers rose, particularly those who had been on short-term introductory rates and now faced large increases in monthly repayments, many investment firms discovered their portfolios were not as secure as expected, and thus had to lower their valuations of these assets. This caused the collapse of three companies: Bear Stearns, Lehman Brothers and Merrill Lynch, which were leading members of the association. It also left other members in financial trouble, leading to the association having to scale down, including laying off staff members.

Another blow to the reputation of the Securities Industry and Financial Markets Association® came with the conviction of Bernie Madoff, an investment advisor who had carried out a large scale Ponzi scheme. Rather than making money for existing clients through investments, Madoff was simply giving them money collected from new clients, a scheme that perhaps inevitably collapsed. Madoff had previously been on the board of directors of the Securities Industry Association, while his brother, Peter Madoff, was on the Securities Industry and Financial Markets Association board until 2008.

The Securities Industry and Financial Industry Association® has since attempted to raise the public image of its members and the industry as a whole. This has included lobbying politicians and the media. As well as dealing with the fallout of the credit crunch, it has campaigned on behalf of members to support their rights to foreclose on mortgages that have gone into default.

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