LITTLE GUYS DETERMINED TO FIGHT BROKERS GROUP FROM THE INSIDE: SMALL INDEPENDENTS, HAVING WON 2 NASD BOARD SEATS, SEEK MORE

Two associations that complain the small independent broker-dealer is treated unfairly by the National Association of Securities Dealers are already working on getting two more members elected to the self-regulatory organization’s board of directors.

The Independent Broker-Dealer Association in New York and the California Association of Independent Broker-Dealers plan to send out letters to the 5,600 such firms across the country seeking nominations for the yearend elections. Last year, the groups won two seats on the 35-member board — even beating out James Dimon, until recently the president of Citigroup Inc.

“We learned how to work together last year, and we hope through early campaigning this year we can get closer to having representation on the NASD board that matches our size,” says Lou Ruiz, a spokesman for both organizations.

2 out of 4 ain’t bad

In December, they nominated an independent slate of four candidates, and the two elected were Alan Davidson, president and founder of Zeus Securities in Jericho, N.Y., and LaRae Bakerink, vice president and director of compliance of SK International Securities in La Jolla, Calif.

Mr. Davidson has long been a vocal critic of the self-regulatory association, parent of the Nasdaq-Amex Market Group and NASD Regulation Inc. He claims that small brokerages have been underrepresented and overregulated by the association.

“I would like a calmer and gentler NASD which would assist firms with compliance, rather than hit them over the head with fines,” says Mr. Davidson. “After all, the NASD was originally founded to help the small guy get into the securities business, and small broker-dealers are the key to helping small businesses in the U.S. get on their feet.”

The NASD did not return telephone calls, and a round of calls to the largest brokerages did not yield comments.

Last December’s election was held to fill a dozen open seats on the board. Three vacancies were designated for members representing the brokerage industry. Mr. Davidson and Ms. Bakerink beat out two industry veterans nominated by the NASD — Mr. Dimon and E. David Coolidge III, chief executive of William Blair & Co. in Chicago.

overregulation charged

Mr. Davidson claims that the NASD began to overregulate the small-broker community following a Securities and Exchange Commission report in 1996. The report, which was an 18-month investigation of the NASD, found that the association had failed to regulate its Nasdaq market effectively.

The SEC required the association to spend $100 million on compliance, which Mr. Davidson says resulted in a “grossly unlevel playing field” and an “overregulated nightmare.”

`We’re hopeful the NASD will adjust to a policy of inclusion,” he says.

“We want some demonstration that it’s serious about getting fair and balanced representation. After all, they didn’t approach us. We had to work hard to get those seats.”