June 8 (Bloomberg) -- TD Ameritrade Holding Corp. received a demand from Jana Partners LLC and SAC Capital Advisors LLC for records of board discussions, a week after the hedge funds began pushing the third-biggest online broker to find a merger partner.

The records will let shareholders ``judge for themselves the board's conduct and whether each director has honored his fiduciary duties,'' Jana Managing Partner Barry Rosenstein and SAC Chief Executive Officer Steven A. Cohen wrote in a letter dated today.

The fund managers said in a May 29 letter they'd taken a combined 8.4 percent stake in the Omaha, Nebraska-based company, and they accused Toronto-Dominion Bank, TD Ameritrade's largest shareholder, of blocking a merger for its own benefit. They said the Canadian bank, which owns 40 percent of TD Ameritrade and appoints five of the 12 board members, uses the brokerage's resources to boost Toronto-Dominion's expansion in the U.S.

``We find it astounding that the independent members of the board have not done more to cleanse the board's review of strategic combinations of influence by Toronto-Dominion,'' the fund managers wrote. A request for documents under the laws of Delaware, where TD Ameritrade is incorporated, will be sent ``shortly,'' their letter said.

Shares of TD Ameritrade rose 93 cents, or 4.7 percent, to $20.93 at 4 p.m. New York time in Nasdaq Stock Market trading. They've gained 29 percent this year.

Merger Analysis

A merger with Charles Schwab Corp., the biggest online broker, could produce annual benefits of $800 million, while a deal with E*Trade Financial Corp., the fourth-largest, could produce $600 million, the hedge funds said today. The funds also produced a 21-page analysis of potential combinations.

TD Ameritrade said June 5 in response to the funds' first letter that it was open to a transaction at the right time with the right partner.

``We fail to see how an unbiased review could leave any doubt that the `right time' to pursue such a combination is now,'' the hedge funds wrote today. ``The currently favorable industry environment for transactions will most assuredly not last forever, creating the real risk that if the board continues to wait, it will have permanently squandered this opportunity.''

TD Ameritrade spokeswoman Katrina Becker confirmed the company received the letter.

``We are always talking with our peers in the industry about consolidation,'' Becker said in response to a question about whether there are any current merger discussions. ``We have been and will continue to talk.''

Schwab, based in San Francisco, said this week it's not interested in TD Ameritrade, and New York-based E*Trade didn't comment. Schwab shares rose 2.4 percent to $21.73, while E*Trade rose 4.3 percent to $25.21.

Distracting Moglia

At an investment conference in New York yesterday, CEO Joseph Moglia said Cohen and Rosenstein had created a ``media- type of distraction'' that ``takes more of my effort'' away from running the company.

``They're doing their job, they're doing what they feel they have to do,'' he said of the two fund managers. ``Whether or not that may be beneficial for all shareholders, I think that's a question mark.''

Toronto-Dominion spokesman Neil Parmenter said today that the bank's ``position hasn't changed, which is that anything's on the table, anything's possible.''

The hedge funds' letter said Toronto-Dominion's representatives may have set preconditions for any merger, including keeping a minimum stake and board representation in the resulting company.

``We're not going to debate them line by line,'' Parmenter said. ``The bottom-line message is that our interests are aligned with those of the other TD Ameritrade shareholders.''

Pay Attention

The demand for records is ``a shot across the bow at the directors, saying, you better pay attention to everybody, not just the one who put you on board,'' said Larry Hamermesh, a professor at Widener University School of Law in Wilmington, Delaware.

The request is unlikely to succeed without more specific allegations of misconduct, Hamermesh said.

Jana's Rosenstein, 48, a former Merrill Lynch & Co. investment banker, is known for taking stakes in companies alongside billionaire investor Carl Icahn and pressing managers and directors to boost their stock prices. Targets have included Time Warner Inc. and Kerr-McGee Corp. Last month Rosenstein urged aluminum maker Alcoa Inc. to drop a planned takeover of Alcan Inc. and consider putting itself up for sale.

SAC's Cohen, 50, founded his firm in 1992 and also took part in Icahn's Time Warner campaign. Alpha magazine reported Cohen earned $900 million last year, and last month he bought an Andy Warhol image of Marilyn Monroe, ``Turquoise Marilyn'' for an estimated $80 million. His fund manages about $12 billion.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: June 8, 2007 16:36 EDT