finra

FINRA

 

For Release:
Contacts:
Wednesday, December 6, 2006
Howard Schloss (202) 236-5296
Herb Perone (202) 728-8464, (202) 497-2481

 

 

NASD Board of Governors Overwhelmingly Approves By-Law Changes Necessary for Consolidation with NYSE Regulation; By-Law Changes Now Go To NASD Member Firms for Approval

 

New York — NASD today announced that its Board of Governors overwhelmingly approved by-law amendments that would implement governance changes to enable the recently announced consolidation of the member regulation units of NASD and NYSE Regulation into a new, independent self-regulatory organization (SRO). The by-law amendments will be voted on by the full membership of NASD before taking effect.

"The vote today by the NASD Board recognizes the importance to the securities industry and investors of creating this single SRO," said Richard Brueckner, NASD's Presiding Governor and CEO of Pershing, LLC. "The greatly increased efficiency and cost savings brought about by this consolidation will benefit firms of all sizes. We are confident that after firms have a chance to study the details of the plan, they will support it."

Brueckner said a proxy card and a detailed information package will be mailed to NASD member firms next week. Firms will be given 30 days to vote on the by-law changes. "Firms will have a detailed description of the deal, especially of a governance structure that ensures significant and broad-based industry participation in the new SRO," Brueckner said.

The plan to form the new SRO was announced November 28 at the Securities and Exchange Commission. The new SRO would be responsible for all member examination, enforcement, arbitration and mediation functions, as well as all other current NASD responsibilities, including market regulation by contract for NASDAQ, the American Stock Exchange, the International Securities Exchange and the Chicago Climate Exchange. NYSE Regulation will continue to oversee the NYSE market, through its market surveillance division, related enforcement functions, and listed company compliance.

A 23-person Board of Governors will oversee the new SRO's activities, with 11 seats held by Public Governors and 10 seats held by Industry Governors. Large firms, consisting of 500 or more registered persons will elect three seats on the new Board. Small firms, consisting of 150 registered persons or fewer, will elect three small firm seats on the new Board. Currently, small firms are guaranteed only one seat on the NASD Board. Medium sized firms with 151-499 registered persons, NYSE floor members, independent dealer/insurance affiliated firms, and investment companies will each be guaranteed one seat on the new organization's Board. The Chairman and the CEO will also serve on the Board.

In addition to the by-law amendments, the NASD Board also approved a major revamping of NASD's Small Firm Advisory Board (SFAB), including changing the composition of the SFAB and the process of selecting its members. The changes are designed to increase the participation of NASD member firms in the SFAB selection process and ensure that the views of the SFAB will be communicated to the NASD Board of Governors.

Currently, the SFAB has between 11 and 15 members, each typically serving two one-year terms. Eleven members are chosen from eligible small firms from each NASD District. The remaining "at-large" members are selected by NASD's Corporate Governance Committee.

With the changes approved today, small firms in each of the five NASD regions will elect one member to the SFAB. Five at-large members will continue to be appointed. The terms of SFAB members will be increased to three years. All small firm members of the Board of Governors will be ex-officio members of the SFAB.

The Board of Governors said the SFAB provides guidance to the Board about the potential impact of proposed regulatory initiatives on small firm members of the NASD; and to initiate and undertake special assignments for the Board and NASD.

NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.nasd.com.