NASD to Streamline Subsidiary Boards

The board of the National Assn. of Securities Dealers Inc., which oversees the Nasdaq Stock Market, voted as expected Thursday to streamline the organization’s governance structure.

Acting on a proposal by NASD’s chairman and chief executive, Frank G. Zarb, the directors voted unanimously to keep the NASD’s two subsidiary boards--one for NASD Regulation Inc. and another for the Nasdaq Stock Market. But they slashed the size of the two boards and gave the remaining members a seat on the parent board as well.

The parent board membership will increase from 10 to 27, while the 23-member NASDR board will shrink by three-quarters and the 15-member Nasdaq board by half.

The NASD board also decided to coordinate the timing of meetings of the three boards so that decisions can be made swiftly. In recent months, Zarb has publicly complained that the board structure has slowed his ability to run the organization. The two subsidiary boards will now meet the day before the parent board so it can promptly ratify or amend their decisions.

Some members of Congress and officials of the SEC kept a watchful eye on the process to make sure that the overhaul did not weaken the reforms imposed last year by the government after federal investigators found anti-competitive practices by NASD member firms that served to disadvantage investors. As part of a landmark settlement with the SEC, the NASD agreed to create a separate self-regulatory arm insulated from Wall Street pressure.

Zarb had considered doing away entirely with the NASDR and Nasdaq boards but changed his mind after more than a month of consideration.

The plan must now be approved by NASD member firms and the SEC.