A group of seat owners and members at the American Stock Exchange have sued the NASD, which owns the Amex, to halt a March 18 vote to transfer the exchange back to the membership.
The suit, filed Thursday in New York Supreme Court, alleges that the NASD – which acquired the Amex in 1998 to become a “market-of markets” – has mismanaged the Amex.
It also claimed Amex violated New York not-for-profit-laws in granting management excessive compensation and violated terms of the original agreement in which the NASD acquired the Amex.
“Since the acquisition, management of the American Stock Exchange by the NASD has been riddled with conflicts of interest and the American Stock Exchange has been mismanaged by NASD’s handpicked directors and governors who have served exclusively in the interests of NASD and Nasdaq and their allied corporate entities,” the suit reads.
The suit seeks to halt the vote and terminate the $50 million loan the Amex owes the NASD under the terms of the deal.
The lead plaintiff, Stuart Alpert, is not a seat owner but rather a member of the Amex.
The suit does not stop Amex and NASD management from soliciting votes before the March 18 vote. Both sides will appear in court Tuesday.
A spokesman for the NASD declined to comment and a spokeswoman for the Amex also declined to comment.
The suit alleges the NASD has paid only $40 million of $215 million owed to the Amex.
It faults the NASD for failing to deliver on technology deals that many of the members themselves opposed when they were proposed.
It also alleges that management violated New York not-for-profit law in agreeing to “excessive, exorbitant and unreasonable compensation.” The compensation deal was approved by the NASD, the Amex membership corporation and the exchange.
The case highlights a controversial payment of $1 million that was made by the NASD to Anthony Boglioli, vice chairman and floor governor at the Amex.
That payment, negotiated with the NASD, was viewed as a conflict of interest as Boglioli was voted to represent the interests of the floor of the Amex.
If the deal is approved, Amex CEO Sal Sodano will walk away with $22 million, an amount negotiated in 1998 under NASD head Frank Zarb.
In a bizarre twist, the suit also alleges fraud on the part of NASD, suggesting the NASD tried to divert listings from the exchange to the Nasdaq, which the NASD still has voting control over.
The basis of that charge was unclear in the suit.