The final fate of two lawsuits arising from the 2007 merger of NASD and the
New York Stock Exchange's regulatory unit could be decided in the coming months.
In a hearing earlier this week, Judge Jed Rakoff of the U.S. District Court for the Southern District of New York said he will decide whether to dismiss the pair of cases before the end of the year.
The suits, filed by two broker-dealer firms, claim that NASD's proxy statement for the merger was misleading.
Specifically, the suits allege that NASD, now known as the
Financial Industry Regulatory Authority Inc., falsely claimed that the $35,000 it paid to each member firm — in exchange for their giving up significant voting rights — was the maximum allowed by IRS rules governing non-profits.
The suits also name a number of NASD executives, including its former CEO Mary Schapiro, who is now SEC chairman.
Mr. Rakoff was the judge who last month rejected a proposed settlement between
Bank of America Corp. and the SEC.
That case involved bonuses paid by Merrill Lynch & Co. The SEC alleged that
Bank of America's proxy, which solicited shareholder approval for the Merrill purchase, should have disclosed the payments.
The NASD-NYSE merger case was reassigned to Mr. Rakoff last month.
“Having this judge is potentially a good thing, so we're all very hopeful,” said Ted Siedle, owner of Benchmark Financial Services Inc. in Ocean Ridge, Fla., one of the plaintiffs.
The plaintiffs' attorney, Jonathan Cuneo, founding member of Cuneo Gilbert & LaDuca LLP in Washington, declined to comment on how Mr. Rakoff might rule.
The judge “is clearly engaged and actively looking at the issues,” Mr. Cuneo said.
Another federal judge dismissed the original case, filed by Standard Investment Chartered Inc., in May 2007.
In December 2008, Benchmark filed a similar case.
In March of this year, a federal appeals court sent the Standard case back to the lower court for a hearing.
The parties last month agreed to have the fate of both suits considered by the lower court.
Finra spokesman Herb Perone declined to comment.
Finra has said in the past that the cases lack merit, and has asked for the claims to be dismissed.
