Dissidents Elected to NASD Board of Governors
By
John Churchill
Held today at NASD
headquarters in
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“This is the first
time in the history of the NASD that dissidents won a majority of the contested
seats up for election”, says Bill Singer, a securities lawyer and a columnist
for Registered Rep. magazine. The last victory in which dissidents won, we took
2 out of 4. This time they took 2 out of 3.”
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Singer continues, “To
the extent these results are a message to the NASD, it is clearly a flaming
arrow. Given the paranoia the regulated members have about doing anything
contrary to the regulator's wishes, the fact that so many firms put their names
on ballots and voted against the NASD’s hand-picked nominees is a dramatic
repudiation.”
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Winning the other two
available seats up for election today—and not on the dissident slate—were
official nominees John Simmers, CEO of ING Advisors Network, and John Brennan,
Chairman and CEO of The Vanguard Group.
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Normally, per NASD
governance procedure, a nominating committee chooses candidates to put on the
ballot for election in the eleven districts and for the National Board of
Governors. Made up of people chosen by the district and board members, the
nominating committees choose the next term’s candidates. Since the candidates
are not selected by the membership, the National Nominating Committee is
entrusted to nominate a diverse cross-section of the industry to fill the open
seats.
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Kovack and Dedman were
not selected as part of this process, so in order to get on the ballot, per the
NASD by laws, they needed to acquire 10 percent of the NASD membership’s
signatures—a feat they achieved in roughly 2 weeks.
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That process, say the
so-called dissidents, favors the status quo, with current members nominating
their friends and peers to take over their seats at the end of their two-year
term.
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But an unfair election
process is just one allegation of the dissidents. They say the whole
self-regulatory system tilts in favor of large firms. The NASD denies any
allegations that it favors one
business model over
another; in fact, Mary Schapiro, NASD head of Regulatory Policy and Oversight,
has said in the past that the NASD is entirely “agnostic” in that regard.
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However, the
dissidents say small firms are being driven out of business because of an
overzealous NASD that fines firms, instead of helping or guiding them, for non-customer
protection related technical infractions like late reported bond trades, for
instance.
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John Busacca,
president of North American Clearing, and one of three dissident winners that
swept up the three available seats in District 7 last December, was in
attendance at the board election. In the past few months he’s been sending out
email blasts and letters and stumping at conferences around the country to
raise awareness among small firms about the NASD election process and the
group’s platform. In a letter sent out days before today’s Board of Governor’s
election, Busacca wrote:
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Too many good firms,
and more importantly good people, are being put out of business NOT BY THE
RULES of the NASD [Busaccaxs emphasis], but by the RABID ENFORCEMENT of the
rules through excessive fines, suspensions and use of legal expense warfare.
Small firms often collapse to the demands of an AWC [Acceptance, Waiver &
Consent] in order to avoid spending thousands on legal fees.
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Alan Davidson,
president of Zeus Securities in
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Singer, of Gusrae
Kaplan Bruno & Nusbaum in
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As members now of the
18 member National Board of Governors, Kovack and Dedman will certainly be able
to voice the displeasure of their constituents, but they’ll also be able to
vote on the very proposals that they say are suffocating the small
broker/dealers. They also hope the election win will be an eye-opener for
smaller firms that think the NASD is a large firm organization. “People need to
realize it’s one firm, one vote, and has nothing to do with the organization’s
size.”