NASD Names Members of 3 New Boards

Carrying out a massive overhaul meant to give the investing public more say in its affairs, the National Assn. of Securities Dealers named the members of its three new boards of directors Monday, although the slim majority of “public” members includes executives with direct ties to the securities industry.

The makeup of the new boards is important because they will have ultimate say over how far the NASD and its subsidiary, the Nasdaq Stock Market, go in reforming themselves in response to widespread criticism, particularly that they have been dominated by big Nasdaq dealer firms to the detriment of individual investors.

The 51 directors named to the three boards include 23 new ones. Among them are the heads of three of Wall Street’s largest investment houses--Daniel P. Tully, chairman and chief executive of Merrill Lynch; Jon S. Corzine, chairman and senior partner of Goldman, Sachs & Co.; and James Dimon, chairman and chief executive of Smith Barney.

Also named were several former Bush administration officials; a former Republican congressman; representatives from mutual fund companies; three former Securities and Exchange Commission commissioners; and James E. Burton, chief executive of the California Public Employees’ Retirement System, the nation’s largest public pension fund.

SEC Chairman Arthur Levitt, who played a major role behind the scenes in the selection process, said the NASD has taken a significant step forward in representing the interests of all its constituencies--investors, Nasdaq companies and member firms.

The new boards were announced as two massive federal investigations of the NASD and Nasdaq stock market, by the Justice Department’s antitrust division and the SEC, are winding to conclusion. The overhaul came in response to recommendations in September by an independent committee led by former Sen. Warren Rudman, who called for the NASD to be divided into three related entities, each with a majority of public members on its board.

Rudman said he was pleased with the selection although he took no part in it.

The boards are the 10-member parent board of the NASD; the 27-member board of a new entity, NASD Regulation, carved out to police Nasdaq trading and enforce rules regulating brokers; and a 15-member board of the Nasdaq market. A new president of Nasdaq, who has not been selected yet, will be included on that board.

The new boards contain no public critics of the Nasdaq Stock Market, but they also don’t include some of its most outspoken defenders. As reported, the NASD had been criticized for making no public solicitation of members for the boards, and for seemingly excluding recognized critics from consideration.

But in a telephone news conference, NASD President and Chief Executive Joseph R. Hardiman said the new members were selected from more than 180 candidates “submitted to us from a diversity of sources” and that the process yielded independent-minded members. He said of the new directors: “I don’t think we’ve got any shrinking violets in the crowd.”