"FIN RAH!" ... A WELCOME CHANGE: WHY THE MERGER WAS NECESSARY TO PRESERVE U.S. MARKET INTEGRITY

Fordham Journal of Corporate & Financial Law, 2008 by Cervantes, Yesenia

The third area of concern was the selection of arbitration for the merged entity's dispute resolution forum. The critics that cited the arbitration forum182 as a point of conflict took issue with the composition of the arbitration panels, the costs to customers and dispositive motions.183 Integration of the two forums is still in progress and the comments concerning the panels and dispositive motions will be taken into consideration.184 One critic claimed that a share of the cost savings from the consolidation should have been used to reduce customer fees for use of the new arbitration forum.185 In its response, the NASD provided that the resulting lower costs for administration of the forum impacted the firms, not the investors.186 Firms are the ones that bear the expenses associated with the forum because they are the ones that have to pay for "staff salaries and benefits, arbitrator training and travel, long-term leased space, computer systems, supplies, and equipment."187 Users of the forum, on the other hand, are only responsible for paying fees associated with administration of their own personal claims.188 Therefore, it is justified that the cost savings be spread to the firms and not to individual investors.

2. Support

Many voiced the end of duplication, inefficiency and exorbitant costs as the basis for their support for the merger,189 regarding the change as a positive move for the industry. One supporter felt that the merger would allow "business owners and representatives [to] spend more time focusing on their customers rather than [on] a myriad of inconsistent rules from multiple regulators that are not based on the type of business or service that [they] provide."190 Supporters of the merger also called for expedited approval.191 Such sentiments support FINRA's belief that its new configuration will provide greater protection for investors. FINRA commenced its operations under the approval of the SEC in July 2007.192

B. Governance Structure

One of the most talked about changes is FINRA's new governance structure.193 Mary Schapiro, formerly CEO and Chairwoman of the NASD, serves as FINRA's CEO and Richard Ketchum, formerly head of NYSE Regulation, Inc., serves as Chairman of FINRA's interim board.194 The interim board of governors consists of twenty-three members for a transitional period of three years and is structured as follows:

* The CEO and Non-Executive Chairman will serve on the interim Board of Governors.

* Eleven Governors will be appointed from outside the securities industry.

* The current NASD Board and NYSE Boards each will appoint five Public Governors.

* One Public Governor will be appointed jointly by both organizations.

* Ten Governors will be from inside the securities industry.

* Three representatives (nominated by NASD) to be elected by small firms (1-150 registered representatives); small firms may also present their own slate of nominees.

* One representative (jointly nominated) to be elected by medium-sized firms (151-499 registered representatives); medium-sized firms may also present their own slate of nominees. Three representatives (nominated by NYSE) to be elected by large firms (500 or more registered representatives); large firms may also present their own slate of nominees.