The Securities and Exchange Commission has published for comment the proposal of the National Association of Securities Dealers, Inc. to consolidate into a new, yet to be named, self-regulatory organization (SRO) the regulatory functions of the NASD and the New York Stock Exchange. For the first three years, the new board will have 23 members: 11 public governors with no material business relationship with a broker-dealer or an SEC registered self-regulatory organization – 5 appointed by the NASD, 5 appointed by the NYSE, and one appointed by both the NASD and NYSE; 3 large firm governors – registered persons associated with firms that employ 500 or more registered persons, nominated by the NYSE and elected by members in that category who may also make nominations; one mid-size firm governor, registered with a firm that employs between 151 and 499 registered persons, nominated jointly by the NASD and NYSE and elected by members in that category who may also make nominations; 3 small firm governors - persons registered with a member employing 150 or fewer registered persons and elected by members in that category who may also make nominations; one governor associated with an NYSE floor member, appointed by the NYSE; one independent dealer/insurance affiliate governor appointed by the NASD; one investment company affiliate governor appointed by the NASD; the CEO of the SRO – Mary Schapiro; and the CEO of NYSE Regulation – Richard Ketchum.

Mr. Ketchum will be the non-executive chairman of the SRO. A Lead Governor will be appointed by the board after consultation with the CEO to act as chair when the CEO and non-executive chairman are recused and to chair executive sessions of the board. The CEO, non-executive chairman and Lead Governor can call board meetings and place items on the board agenda. The transition board will have an NASD group committee, NYSE group committee, small firm governor committee, large firm governor committee, an executive committee of 5 to 8 members including Ms. Schapiro and Mr. Ketchum, and Audit, Finance and Nominating Committees.

After three years, Mr. Ketchum will cease serving on the board, and the board will be reduced to 22 members comprised as described above. The NASD group committee and the NYSE group committee will cease to exist. During and after the transition period members of the SRO will only be allowed to vote for the large firm, intermediate firm and small firm governors, depending upon the member’s classification and not for any other governors.