finra

FINRA

 

For Release:
Contact:
Thursday, June 26, 1997
Reid Walker - (202) 728-8243

 

NASD Announces Plan for Restructuring Boards to Streamline Decision Making

Washington, D.C.-- The National Association of Securities Dealers, Inc. (NASDâ), today announced that its Board has approved a major plan to streamline decision-making by reducing the size of its subsidiaries’ Boards of Directors and including those directors on the NASD Board. The measure is now subject to approval by NASD members and the Securities and Exchange Commission.

 

Frank Zarb, NASD Chairman and Chief Executive Officer, said "The proposed changes will enhance the core corporate governance principles put in place last year by creating a more efficient structure for the NASD. The plan preserves a balanced governance structure with independent corporate and operating entities as well as clear and distinct roles for each. We’re part of an industry that moves with great speed. The recommended new structure will better equip NASD to get the job done."

 

The plan calls for an interlocking structure, with both the Nasdaqâ and NASD Regulation boards shrinking in size and becoming part of an expanded NASD parent board. Under this plan, the total number of Board members will be reduced from 48 to 27, the number of board meetings reduced from 17 to 7, and the number of board committees reduced from 9 to 5.

 

The NASD board will maintain a majority of non-industry members while the two subsidiary boards will be balanced between industry and non-industry representatives. Both subsidiary boards will meet the day before the parent board, so that matters decided by the subsidiaries can be considered immediately by the parent for final action. This will significantly reduce the time required to approve rule filings and other policy changes.

 

The NASD board will increase to 27 board members. The non-industry majority of members will include at least four public governors, a representative from the Nasdaq issuer community, a representative or affiliate of an issuer of investment company shares, and a representative of an insurance company. In addition, four senior executives will serve on this board. The Board of the NASD will retain ultimate policymaking, oversight and corporate authority as the parent holding company.

 

Presently, the NASD Regulation board has 24 members. The revamped board will have five to eight members; each serving a three-year term. While the revamped board continues to bear primary responsibility for all regulatory matters, it may take decisions directly to the parent board, as under the new structure all Regulation board members will be members of the parent body.

 

The Nasdaq board, which currently has 16 members, will also shrink to between five and eight members. It will continue to have primary authority for market-related rulemaking. Any rule change by the Nasdaq board that imposes fees or other charges on anyone other than NASD members or issuers will be subject to review and ratification by the parent board. Members will serve three-year terms and also be members of the parent board.

 

A single NASD Board Executive Committee will be created to replace the two subsidiary executive committees and this committee will also have a non-industry majority. This committee will be able to expedite decision making further as it can convene by telephone between regularly scheduled board meetings to consider time-sensitive issues.

 

A National Adjudicatory Council (NAC) will be created to replace the current National Business Conduct Committee. The NAC will consider and review adjudicatory decisions such as disciplinary decisions, statutory disqualification decisions and disciplinary-related policy matters. All decisions of the NAC will be subject to call out and review by the NASD Board. The Council will be composed of twelve members, equally balanced between industry and non-industry members, including at least three public members.

 

The National Association of Securities Dealers is the largest securities-industry self-regulatory organization in the United States. Through its subsidiaries, NASD Regulation, Inc., and The Nasdaq Stock Market, Inc., the NASD develops rules and regulations, conducts regulatory reviews of members activities and designs, operates and regulates securities markets all for the benefit and protection of the investor.