September 5, 2002 11:19 AM PDT

Ameritrade merger wins two key votes

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The National Association of Securities Dealers has approved Ameritrade's merger with Datek, Ameritrade said Thursday, despite lingering questions about the practice of so-called cashless trades on the companies' brokerage systems.

NASD's approval is the last regulatory hurdle for the deal, which the companies announced in April. With Ameritrade shareholders approving the deal on Thursday, the only remaining obstacle is a vote by Datek stockholders, scheduled for Friday.

The companies expect the merger to close next week. The merger would create the largest online brokerage in terms of average trades per day, the companies say.

NASD gave approval to the change of control of Datek's broker-dealer subsidiaries on Wednesday, Ameritrade said in a regulatory filing Thursday. NASD spokesman Michael Shokouhi confirmed that the organization had approved the merger.

Last month, NASD separately warned Ameritrade and Datek to stop allowing customers to execute cashless trades. Both companies permit customers to purchase stocks with the proceeds of other securities they sold on the same day, even though the funds from the sale have not yet trickled into their accounts. NASD charged that the practice violates Federal Reserve System regulations that prohibit the sale of a stock before it's been fully paid for.

Ameritrade is working closely with the NASD to resolve the issue and expects to discuss it more with investors after the merger's expected close, Ameritrade spokeswoman Donna Kush said.

"We're still discussing with (the NASD) how to handle this," Kush said.

More than 99 percent of the votes cast by Ameritrade stockholders were in favor of the merger, the company said in a statement. The votes were cast by proxy and at a special stockholders meeting in Omaha, Neb.

Under the merger agreement, Datek stockholders will own about half of the total shares of the combined company.

Separately on Tuesday, Ameritrade announced eight of the nine board members of the combined company. J. Joe Ricketts, the founder and chairman of Ameritrade, will serve as chairman of the combined company. Other current Ameritrade directors who will serve on the new board will include J. Peter Ricketts, J. Joe Ricketts' son and president of Ameritrade's private client division; and Mark Mitchell, an associate professor of business administration at Harvard.

Other directors of the combined board will include Thomas Ricketts, chief executive officer of Incapital investment bank and another son of the chairman; Stephen Pagliuca, a managing director of Datek investor Bain Capital and a director of Datek; C. Kevin Landry, CEO of TA Associates, one of the chief investors in Datek; Glenn Huthinson, managing member of Silver Lake Technology Management, another Datek investor; and Michael Fleisher, CEO of research firm Gartner.

Ameritrade has not named a ninth and final board member and doesn't have a timeline for doing so, company representatives said.

 

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