Nasdaq Spin-Off Gets Overwhelming Approval

FRAMINGHAM (04/14/2000) - The National Association of Securities Dealers Inc. today overwhelmingly voted to spin off the Nasdaq Stock Market Inc. and make it a independent privately held company.

With an 84% majority - 3,423 in favor and 652 opposed - the NASD membership decided to separate Nasdaq from NASD and NASD Regulation.

The vote means that Nasdaq will become a privately owned company, with almost 50% of its stock being sold to private investors - including the broker dealers who are currently members of the exchange - by the end of May, according to NASD Chairman Frank Zarb.

"This is a private placement, not an IPO," he said, pointing out that shares won't be offered publicly.

By the end of September, NASD plans to sell off another 80% of its shares, according to Zarb.

"It will be the largest holder but not the controlling holder," he said.

Once these two selloffs are completed, the Nasdaq board will consider taking the company public, he added.

The move will help the Nasdaq innovate and eliminate possible conflicts of interests with the NASD, exchange officials said.

Opponents of the measure disputed the results, pointing to flaws in the voting process.

Alan Davidson, president of the Independent Broker-Dealer Association (IBDA), argued that members weren't given full information about the plan.

Davidson, himself a member of the NASD board of directors, supported the plan when the board voted on it in January, but changed his mind before it was brought to the entire membership on Friday. He felt there wasn't enough information about the way the shares would be divided.

Exchange officials, however, argued that the division of stock was entirely equitable and came as a result of a great deal of deliberation.

Davidson yesterday filed a temporary restraining order to stop today's vote, but it was dismissed later that day.

"There was no basis in either law or fact in this suit," said Ed Knight, NASD's chief legal officer.

But IBDA attorney Saul Roffe said he would file an appeal on Monday.

"We're trying to block the implementation of the vote, since we couldn't block the vote itself," he said.

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