Dear Fellow NASD Member,

For the first time in NASD history, IBDA and the California Association of Independent Broker Dealers (CAIBD) are supporting a slate of candidates for the NASD Board of Governors. We need your support to obtain "fair and appropriate representation" for the NASD Membership, 90%+ of whom are independent/regional small businesses.

By Special Notice to Members 98-80, Frank Zarb announced "NASD selected" Board candidates. He stated the "NASD Nominating Committee has developed a slate of well-qualified candidates." Enclosed were nominee campaign biographies. Why were these "selections" made without small and regional Membership participation? Who do they really represent? Why did the NASD Nominating Committee "select" two of their own committee members for the Board? Who selected the Nominating Committee?

The enclosed NASD statistics illustrate the future of your business under the present regime. Title; "And Then There Was None!" During the last ten years, while the SEC "watched" NASD Membership declined 23%. Branch offices increased 300%. This period marked a time of record business incorporations in other industries. The NASD failed to make this information public. The NASD response was that the industry changed. Where are the promised NASD changes and reforms?

"Their" NASD has been busy "dominating and controlling" the agenda, "swapping" seats and incestuously passing on "elected" positions. In April, 1993 I wrote you urging a no vote on Ballot 93-15 eliminating your vote on rule changes. Members were influenced by NASD promises of lower expenses and a user-friendly manual. Continuing Education and Year 2000 rule changes have become an NASD profit center and a vehicle to eliminate more small Member firms. When the SEC proposed exemption from Year 2000 compliance for $5,000 Members, the NASD insisted upon inclusion. Yesterday, the SEC and NASD announced enforcement actions against 59 firms for Year 2000 filing violations. Does late filing justify a $2500 fine, censure and Internet exposure? Should fines range from 15% to 100% of net capital? The NASD wants to export this "Brave New World vision" of regulatory dysfunction to registered investment advisors.

I know some of you are afraid of NASD retaliation. The NASD promotes this fear. They perceive the Membership as "55 Days in Peking" with different "constituencies." A sad example was provided when the Securities Industry Association (SIA) requested NYS Attorney General Dennis C. Vacco's Microcap Fraud Hearings to exempt New York Stock Exchange members from "cease and desist orders." (www.oag.state.ny.us/)

"Their" Board "selections" are political "pork barrel" and your business is the pork! Justice Brandeis said "sunlight is the best disinfectant." The cure for political betrayal is the vote. We can win! In December, 1997 I wrote you urging "Green Flu," withholding your proxy for the NASD Annual Meeting. 65% of the Membership supported us. The NASD never publicly announced the results. The existing Board was elected by default and represents the Membership minority. The NASD is fearful of Membership retaliation for betrayal of their trust. I urge you to use your power! Awaken your vote! Put the stone in the sling and help us slay this evil Goliath!

If you do nothing, the NASD "behind closed doors selections" will also be elected by default. Their candidates will continue to threaten your business. The NASD will continue feeding on your Membership. You will continue to be bled paying for their out of control expenses. Frank Zarb recently referred to me as his "friend" in addressing the CAIBD. I am not yet prepared to give him the keys to my office! If you want to continue in business, you need true representation of your choosing. Our nominations will be fair and open minded. They will fight for the Membership! Competition brings out the best! You must nominate and vote only for people who will represent your interests!

One firm, one vote without regard to size! This vote can only be exercised by the firm's designated Executive Representative whose name appears on the label of Notices and ballots. Under NASD rules we must obtain petitions signed by 167 Executive Representatives within forty-five days of the original Notice. We need your firm Executive Representative to immediately complete and sign the enclosed Nominating Petition and fax it with a hard copy original mailed to us no later than Friday, November 6, 1998. Please cross out the name of any candidate you believe will not represent the Membership.

We need your help to make calls, contact others in your network and contribute funds. All contributions will remain confidential. The CAIBD effort is being coordinated by Don Brooks, Executive Director who can be reached at 1-818-222-3950.

I would like to express appreciation to Joseph W. Mays, Jr., Securities Consulting Group, New York City (1-212-825-2040) who is Compliance Advisor to IBDA for his untiring assistance. Appreciation is also due Robert G. Velez of Millennium Networks, LLC, New York City (1-212-849-1222), the creator of our Website. The address is http://www.IB-DA.org. All election information including the Nominating Petition are available for review and retrieval and this site is regularly updated. Thank you for your continuing support.

Sincerely,

Alan Davidson

President