A merger of regulatory operations for the New York Stock Exchange and the NASD can proceed only if most members on the combined governing board are independent of the industry, Securities and Exchange Commissioner Annette Nazareth said Thursday.
"The commission is keenly interested in having effective board governance and having independent board directors," Nazareth said in an interview.
The SEC has the authority to reshape the industry's self-regulatory groups, she added, without saying whether the agency will do so.
The NASD, formerly the National Assn. of Securities Dealers, is asking member firms this month to approve new bylaws to allow a merger with the NYSE's regulatory arm. The plan, which calls for a majority of governors to come from outside the industry, is opposed by a group of small brokerages concerned that it may unfairly diminish their clout.
If NASD members reject the merger, the SEC may dictate changes that are less desirable to members than the current proposal, NASD executives said.