Funds Fire Another Shot at TD Ameritrade

SAC Capital and Jana Partners say independent directors should take control of merger talks.
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Updated from 12:39 p.m. EDT

Hedge fund agitators SAC Capital and Jana Partners have sent a third letter to

TD Ameritrade

(AMTD) - Get Report

calling for change at the online brokerage firm.

Addressing the letter to both TD Ameritrade's CEO Joe Moglia and one of the company's top shareholders, Joe Ricketts, the hedge funds implored the Omaha, Neb., firm to allow its independent directors to take control of M&A discussions.

While SAC and Jana said they are "encouraged that TD Ameritrade has had and expects to continue discussions with industry peers regarding strategic combinations," they believe the online broker has not "taken adequate steps to address the conflicts of interest arising from the presence of directors," appointed by TD Bank," they said in the letter.

The letter, sent on Thursday, is just the latest in a month-long battle between TD Ameritrade and the funds, who own an 8.4% stake in the company.

In early June, SAC and Jana issued their first letter saying that they would like to see TD Ameritrade merge with one of its industry peers -- namely

E*Trade Financial

(ETFC) - Get Report

or

Charles Schwab

(SCHW) - Get Report

.

At the time, they also pointed to "glaring conflicts of interest" between TD Ameritrade and its largest shareholder, TD Bank. The Toronto company owns a 40% stake in TD Ameritrade after last year's merger with TD Waterhouse, its U.S. brokerage operations.

"Specifically, we believe that Toronto-Dominion CEO and TD Ameritrade board member W. Edmund Clark has been allowed to play a significant role in

merger discussions, which we believe undermines the integrity of the process given the clear conflicts between Toronto-Dominion's strategic interest in TD Ameritrade and the interests of all other stockholders," the initial letter said. "The board must remove Mr. Clark from this role and empower the independent directors to reach out to and lead discussions with potential strategic partners."

Jana and SAC also said Thursday that they have filed a request to view TD Ameritrade's books and records related to its exploration of strategic combinations. The hedge funds had previously said they were looking to do so.

A TD Ameritrade spokeswoman said the company is reviewing the letter.

The company has said it is always looking for merger partners, but that it would be "deliberate" with its acquisition strategy. In addition, it said it wouldn't limit deals to other online brokers.

Shares of TD Ameritrade were up 4 cents to $20.18.