Reverse Spin: More fund disclosure in the works

It won’t be long before brokers are expected to disclose whether they wear boxers or briefs.

NASD on Thursday proposed rules that would require brokers to report so-called revenue sharing deals, under which fund companies make cash payments to brokerage firms in return for inclusion in the list of funds that a firm recommends.

They would also be required to disclose situations where they are paid more for selling certain funds. The information would have to be disclosed in writing when the customer opens an account or purchases fund shares.

“Investors have the need and right to know about incentive compensation received by a member firm and its registered representatives, which often differs from fund to fund,” NASD chairman Robert Glauber said in a statement.

Power struggle

* Heads are rolling at Merrill Lynch.

On Wednesday, Merrill Lynch & Co. Inc. announced that its global markets and investment banking chief, Arshad Zakaria, would leave the firm at yearend.

The news comes about a week after the executive vice chairman, Thomas Patrick, was given the boot by Merrill’s chairman, E. Stanley O’Neal, purportedly because Mr. Patrick had lobbied for Mr. Zakaria to be named Merrill’s president against Mr. O’Neal’s wishes.

If Mr. Zakaria had been named president (a post that is currently occupied by Mr. O’Neal), he would have been next in line as CEO. But Mr. O’Neal didn’t want another warm body between himself and the heads of Merrill’s three main divisions, according to a source familiar with the matter.

Mr. Patrick, however, pushed Mr. Zakaria as a contender for the president’s position at a board meeting last month.

So New York-based Merrill has put Greg Fleming, co-head of its financial institutions banking group, and Dow Kim, head of global debt markets, in charge of global markets and investment banking, effective immediately.

Big Board blues

* Nothing like a little scandal to make you rethink your priorities.

Robert M. Murphy, chief executive of LaBranche & Co. LLC, a stock trading specialist firm, resigned Thursday as vice chairman of the New York Stock Exchange’s board of directors.

His resignation, effective immediately, comes as New York-based LaBranche is being investigated by the Big Board for improper trading practices.

The NYSE said its board accepted Mr. Murphy’s resignation but offered no further comment. Meanwhile, LaBranche maintains it has done nothing wrong.

Board game

* The next chief executive who plans to nominate a sister’s lap dog to the board might want to think twice.

The Securities and Exchange Commission on Wednesday proposed a rule that would require companies to disclose how they choose candidates for their boards of directors, a tentative first step in the agency’s effort to give investors greater say in how companies are run.

Gerald McEntee, president of the American Federation of State, County and Municipal Employees, a Washington-based labor union, denounced the proposal.

The change would “do nothing to solve the problem of unresponsive boards of directors,” he reportedly said. “The nomination process is a closed loop totally controlled by current directors and management. No amount of disclosure is going to change that.”

Closing Quote

“Anything we do not understand is behavioral finance. But what a good scientist would do is spend more time trying to understand the behaviors.”

– New Frontier Advisors’ Richard Michaud, on behavioralists’ claims that emotion and psychology significantly affect the markets. Page 6