A day after NASD members voted on a board restructuring that would allow the AMEX merger to proceed, NASD head Frank Zarb told a group of small California brokerages that the merger will not cost us anything. There will not be any money coming out of members pockets to pay for the exchange, he said.
Zarb answered questions at a Sept. 15 meeting of the California Association of Independent Broker Dealers (CAIBD) in Marina del Rey, a Los Angeles seaside community. Zarb also said that one part of the AMEX proposal--a $110 million technology commitment from the NASD--would be NASD technology running on the same platform at the AMEX. Therefore, the technology would not require much more in the way of resources.
The result of the NASD vote was unknown at press time.
Meanwhile, a separate group of small firms threatened legal action if the SEC approves the AMEX merger. The Independent Broker-Dealer Association (IBDA), based in Jericho, N.Y., threatened to stop the merger through injunctive relief through the courts or civil lawsuits against all responsible parties.
The threat was made by IBDA attorney Bill Singer of Singer Frumento in New York.
In a Sept. 14 report to the group, Singer cites the NASDs own figures that show the cost of the deal could run as high as $243 million. The price tag includes the $110 technology commitment; $53 million in restructuring costs; up to $50 million for a seat repurchase program and other costs; and a $30 million advertising program to promote the AMEX and Nasdaq markets.
Singer and the IBDA say that NASD members have never been provided with the actual transaction agreement that details the deal.
The IBDA is also criticizing what it says is a misleading member vote regarding the merger. The NASD ballot and related Notice to Members stated that the vote was to amend the NASD bylaws to reconfigure the NASD board (see OddLots, September 98 RR, Page 50). Without the board changes, however, the merger as proposed could not go through. In an SEC filing, the NASD confirms that it did not solicit comments about the merger from members or the public.
The IBDA and Singer claim the process the NASD has used in pursuing the merger violates the 34 act, which requires that an SROs rules assure a fair representation of its members in the selection of its directors and administration of its affairs. ...