MANHATTAN (CN) – A federal class action accuses the Financial Industry Regulatory Authority of misrepresenting “a $35,000 payment to NASD Members to induce them to vote ‘yes’ on by-law changes that were necessary to effectuate a regulatory consolidation … between NASD and the New York Stock Exchange Group.” Among the defendants is Mary Schapiro, chairwoman and CEO of FINRA, and president-elect Obama’s pick to head the Securities and Exchange Commission.
Named plaintiff Benchmark Financial Services says the defendants misrepresented the $35,000 payment to NASD members, and stood to gain financially by the consolidation.
“This case is about a corporate transaction effectuated by deception,” the complaint states. “It focuses chiefly on the misrepresentations defendants made about a $35,000 payment to NASD Members to induce them to vote ‘yes’ on by-law changes that were necessary to effectuate a regulatory consolidation (the ‘Transaction’) between NASD and the New York Stock Exchange Group, Inc. (‘NYSE’) as well as other contemporaneous misrepresentations and misconduct. …
“The Officer Defendants stood to gain substantially by the Transaction, in terms of enormously higher compensation and benefits, vastly elevated prestige and power resulting from the virtual monopoly regulatory authority created by the Transaction, and the higher degree of control over the board of the consolidated entity.”
Benchmark claims the “misrepresentations were made in a proxy statement issued and disseminated to NASD Members on or about Dec. 14, 2006, soliciting NASD Members’ support for by-law changes necessary to effectuate the Transaction … and at ‘road shows’ held to promote the Transaction.”
Benchmark claims that the “Transaction” increased Schapiro annual compensation from $2 million in 2006 to $3.1 million in 2007.
Lead counsel in the 56-page filing is Jonathan Cuneo with Cuneo, Gilbert & Laduca of Washington, D.C.