March 30, 2007
The SEC may not be empowered to render a decision on the by-laws changes as presented. Note the following language regarding available seats on the Board of Governors of the New SRO:
EXHIBIT 5
page 73 of 144, para.(r)
It is written that a seat on the Board is available for
a person associated with a Member which is an Insurance
Company.
page 76 of 144, para. (w)
It is written that a seat on the Board is available for
a person associated with a Member which is an
Investment Company (as defined in the Investment
Company Act of 1940).
page 77 of 144, para. (ee)
Member is defined as any broker or dealer, admitted to
membership in the Corporation. (currently the NASD, in
the future, the New SRO)
Is Congress prepared to expand the definition of securities broker/dealer to include Investment Companies and Insurance Companies, enabling them to become Members of the New SRO?
What has apparently happened here is that in January, the NASD Membership voted its approval of a change to its By-laws that it had no right to approve.
In turn, this may nullify the January vote.
At a minimum, the SEC is in no position to render a decision on this flawed rule change.