WealthManagement Magazine

NASD Member Calls for Boycott of NASD Election

A vocal NASD critic is orchestrating a boycott of the NASD's upcoming board of governors election.Alan Davidson, owner of tiny Zeus Securities in Jericho, N.Y., and president of the 100-member Independent Broker-Dealer Association, sent a Dec. 10 letter to all NASD members urging them to withhold their votes for any of the candidates offered by the NASD's nominating committee. The election is tentatively

A vocal NASD critic is orchestrating a boycott of the NASD's upcoming board of governors election.

Alan Davidson, owner of tiny Zeus Securities in Jericho, N.Y., and president of the 100-member Independent Broker-Dealer Association, sent a Dec. 10 letter to all NASD members urging them to withhold their votes for any of the candidates offered by the NASD's nominating committee. The election is tentatively scheduled for the NASD's Jan. 15 board meeting.

Davidson is protesting the NASD's revamped nominating and election process, which no longer allows regional NASD district committees, comprised of members, to nominate some of the candidates running for the board of governors. Instead, all candidates now are picked by the NASD's central nominating committee.

"We need to demand representation," Davidson says. "We need people who represent the mainstream of the industry." Davidson figures 60% to 65% of firms have less than 10 brokers, and 90% to 95% have less than 100 reps.

"Nobody [on the proposed board] is from small business," Davidson claims. He says the current candidates were picked by a "secret" process.

The six-person NASD nominating committee, chaired by former Merrill Lynch CEO Daniel Tully, submitted to the board last year a list of eight industry nominees, together with seven non-industry and seven public candidates to round out what will be a 27-member board. Current nominating committee members were themselves chosen by NASD management in 1996 as part of the regulator's reorganization.

The NASD, in announcing its list of candidates last Nov. 15, noted that a potential dissident candidate had 30 days to gather signatures from 3% of the roughly 5,500 broker/dealer members to be placed on the ballot. The NASD also said it would follow up with phone calls to ensure a quorum.

The SRO needs attendance or proxy votes from at least a third of its broker/ dealer members-about 1,800 votes. Davidson's goal is to prevent a quorum and create more time for members to field independent candidates. Dissidents would need to get roughly 160 signatures in 30 days, a difficult task during the holiday season, he claims.

Industry nominees are executives from the following firms (with number of employees noted): Merrill Lynch (49,800); Smith Barney (26,193); Goldman Sachs (10,366); Jefferies Group (993); PaineWebber (15,870); Linsco/ Private Ledger (290 employees, 2,475 independent reps); William Blair & Co. (640); and Wessels Arnold & Henderson, (137).

In 1993, Davidson had a run-in with the NASD when he garnered enough signatures to challenge a board candidate chosen by NASD District 10's nominating committee. He subsequently sued the NASD for alleged mishandling of the election. The SEC and the NASD's own Rudman Committee later criticized the NASD for improper conduct in the contest. But a New York federal court threw out Davidson's claim last June on the grounds that NASD members have no right of action against their regulator.

Meanwhile, on Dec. 18, Davidson met in New York City with NASD chief Frank Zarb, NASD general counsel T. Grant Callery and Zarb's counsel Michael Ryan. Davidson describes the meeting as "an exchange of views" regarding the election and other regulatory issues.

The NASD did not comment by press time.

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