It's that time again — time for another NASD election, and with that the inevitable impassioned debate over whether the regulator is beholden to the big wirehouses that pay the lion's share of dues, to the detriment of the independent majority.
Only this time it's not just the independents vs. the wirehouses. It's the independents vs. other independents vs. the wirehouses.
New York securities attorney Bill Singer, also a columnist for this magazine, is trying to cobble together a grass-roots coalition of smaller, independent brokers to back a challenge to the NASD slate for the board of governors. Failing that, he wants to ally with an existing self-regulating organization, or create a new SRO that, he says, would provide better representation for smaller NASD members.
Is he dreaming? Hard to say. The first-ever contested NASD election was held two years ago with mixed results. Two independents were elected from an alternative slate of four candidates (including Singer, who lost). The winners were M. LaRae Bakerink of Westfield Bakerink Brozak in San Diego and Alan Davidson, president of the 250-member Independent Broker-Dealer Association and Zeus Securities in Hauppauge, N.Y. But NASD politics being fractious, Davidson wound up resigning when he very loudly disagreed with plans to spin off Nasdaq. It's not known if Bakerink will run again.
So how does Davidson feel now? He opts for working within the system, or at least trying to work within the system. “One can go to war at any time,” says Davidson, “but it may be unnecessary while talks are continuing at the bargaining table.” He wants nothing to do with Singer. And Singer wants nothing to do with him. Once allies, the two fell out due to the Nasdaq demutualization, which Singer supported. As for other independent challenges, Singer says: “The more the merrier.”
Meanwhile, the California Association of Independent Broker Dealers, of which Bakerink is president, has weighed in with its views. “This is not the time for people with special agendas to be pitting elements of our industry against one another,” said CAIBD Chairman James Biddle in a July 16 letter to Singer, saying his group would not participate in the contested election movement.
And where does the NASD stand? Rigid. Repeated attempts to talk to Robert Glauber, chairman and CEO, were rebuffed. “We haven't even sent out notification of the election, so there's really nothing to talk about,” says spokeswoman Nancy Condon, adding: “The NASD is well aware of the regulatory and financial burdens that industry self-regulation places on smaller firms. We have taken numerous steps to ease such burdens, consistent with investor protection and assuring market integrity.” Moreover, she says, the organization “will resist proposals that would dilute industry oversight.”
So what's next? The election has been set for Dec. 5. NASD will nominate its endorsed candidates Sept. 4. Dissidents then have 45 days to petition for inclusion of other nominees.
Singer acknowledges CAIBD's refusal to support him was a blow. “CAIBD was a disappointment, but we've already made alternative plans and are moving ahead,” he says, adding that he's been contacted by hundreds of independents who support his campaign.
“The difficulty of taking on an organization the size of NASD is that it always has the ability to buy off opposition by doling out pork barrel-like considerations,” he says.“Give one guy a seat on this committee. Give one gal a seat on this group. Before you know it, the ego sets in and the burning issues no longer seem so urgent.” Singer says this is why he will not run for a seat on the board and is providing his lobbying efforts and legal advice for free.
In the end, Singer and Davidson concur on one thing. “NASD has ceased to function as a membership organization and must return to its roots,” says Davidson. Agrees Singer: “At the end of the day there's only one solution. You involve the membership to the fullest.”
Who knows? Maybe the Supreme Court will end up deciding the election.
What do you think? Visit The Registered Rep. Forum and add your comments to our ongoing discussion on the role of the NASD.