NYSE Group Inc and the National Association of Securities Dealers (NASD) won approval from US brokerages to form a single regulator and cut compliance costs for the securities industry, overcoming opposition from a group of small firms.
NASD members voted 64 percent in favor of approving bylaw changes needed to combine the brokerage industry's main watchdog with the NYSE's regulatory arm, NASD said in a statement yesterday.
Almost 83 percent of the 5,058 eligible members voted, it said.
"The securities industry has embraced replacing an outdated regulatory structure with one that better serves firms and investors in a fast-changing marketplace," NASD chairman Mary Schapiro said in the statement.
The merger was backed by Wall Street's biggest firms, who cited the cost and redundancy of complying with rules enforced by two industry watchdogs. The vote permits NASD to make a one-time US$35,000 payment to each member firm in anticipation of cost savings.
NYSE and the NASD said when they announced the agreement on Nov. 28 that they wanted to create a new organization to oversee all securities brokers and dealers doing business with the public in the US. The venture would begin operating in the second quarter of next year and reduce costs by "millions [of dollars] per year," the groups said at that time.
The vote's results may be challenged by the Financial Industry Association, a group of smaller brokerages that had tried to rally opposition, John Busacca, one of its founders, said earlier this month.
"We will consider all options and we will do what's best for the members as an organization," co-founder Richard Goble said in an interview yesterday. "I don't believe those votes are accurate. If the results hold up, apparently the fear of regulatory retaliation and the $35,000 payment was too much to overcome."
Regulators, including US Securities and Exchange Commission chairman Christopher Cox, said the change would improve policing of financial markets.
"It's a great step forward for efficient and effective regulation," SEC commissioner Paul Atkins said in an interview Jan. 19.
"The more duplication you have out there, it makes life more complicated and more costly," Atkins added.
Though the merger is subject to approval by the SEC, Cox has endorsed the plan. It would make the country's self-regulatory system "more efficient and more robust," he said at a November press conference.
NASD executives crisscrossed the country after announcing the proposal, giving speeches and holding town-hall style meetings to build support among members.
Schapiro would become Wall Street's top non-governmental watchdog through the merger, serving as the organization's chief executive officer.
Schapiro said she became more attuned to the concerns of smaller brokerages during the election.
"The comments we heard while traveling the country weren't lost on deaf ears," she said in an interview yesterday. In the future, "we will get the job done in a way that's less costly and burdensome."
The merged organization will comprise NASD's 2,400 workers and about 470 employees from the NYSE's member regulation, arbitration and enforcement teams. Its name hasn't been decided.
Other brokerage groups have backed the plan, including the National Association of Independent Broker-Dealers, which represents more than 350 brokerages, as well as the Securities Industry and Financial Markets Association, the main lobbying group for Wall Street's biggest brokerages.
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