September 9, 1998



Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: National Discount Brokers Group, Inc. - Definitive Proxy Statement for 1998
    ---------------------------------------------------------------------------

Dear Sir/Madam:

         Enclosed  for filing is the  Definitive  Proxy  Statement  for the 1998
Annual Meeting of Stockholders of National Discount Brokers Group, Inc. pursuant
to Rule 14a-6(a) of the Securities Exchange Act of 1934, as amended.

         If you have any questions or comments regarding this filing, please
call me at (201) 946-4413 or Frank E. Lawatsch, Jr. at (973) 596-4637.

                                Very truly yours,



                               Laura Singer, Esq.

Enclosures






                                                           

                                                       SCHEDULE 14A
                                                      (Rule 14a-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT

                               SCHEDULE 14A INFORMATION

           Proxy Statement Pursuant to Section 14(a) of the Securities
                                 Exchange Act of 1934

Filed by the Registrant x
Filed by a Party other than the Registrant o

Check the appropriate box:
Preliminary Proxy Statement
oConfidential,   for  Use  of  the   Commission   Only  (as  permitted  by  Rule
 14a-6(e)(2)) Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12

                      NATIONAL DISCOUNT BROKERS GROUP, INC.
--------------------------------------------------------------------------------
                 Name of Registrant as Specified in its Charter)

--------------------------------------------------------------------------------
        (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):
x   No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

     1)  Title of each class of securities to which transaction applies:
                                    N.A.

     2)  Aggregate number of  securities  to which  transaction applies: 
                                    N.A.
                                                      
     3) Per unit  price  or  other  underlying  value  of  transaction  computed
        pursuant to Exchange  Act Rule 0-11:  (set forth the amount on which the
        filing fee is calculated and state how it was determined):
                                      N.A.

     4) Proposed maximum  aggregate value of  transaction:
                                                             
                                      N.A.

     5) Total fee paid:
                                      N.A.

      Fee paid previously with preliminary materials:

--------------------------------------------------------------------------------

     o Check box if any part of the fee is offset as provided  by  Exchange  Act
     Rule  0-11(a)(2)  and identify the filing for which the  offsetting fee was
     paid  previously.  Identify the previous filing by  registration  statement
     number, or the form or schedule and the date of its filing.

     1)  Amount Previously Paid:
     2)  Form, Schedule or Registration Statement No.:
      3)  Filing Party:
     4)  Date Filed:


<PAGE>





                          National Discount Brokers Group, Inc.
                                10 Exchange Place Centre
                              Jersey City, New Jersey 07302


         --------------------------------------------------------------------
                        Notice Of Annual Meeting Of Stockholders
                              To Be Held October 20, 1998
         --------------------------------------------------------------------


The 1998 Annual Meeting of the Stockholders of National  Discount Brokers Group,
Inc. (the "Company") will be held at the Company's  offices at 10 Exchange Place
Centre,  Jersey City, New Jersey 07302,  15th Floor, on October 20, 1998 at 4:00
p.m., New Jersey time for the following purposes:

                  (1) To elect three Class 2 directors to hold office for a term
                  of three  years or  until  their  successors  have  been  duly
                  elected and qualified.

                  (2) To ratify the  appointment of KPMG Peat Marwick LLP as the
                  Company's  independent auditors for the fiscal year ending May
                  31, 1999.

                  (3) To  transact  such other  business  as may  properly  come
                  before the meeting or any adjournment thereof.

The Board of Directors  has fixed the close of business on August 28,  1998,  as
the record date for  determining the  stockholders  entitled to notice of and to
vote at the meeting and any adjournment thereof.

Your  attention  is directed to the  accompanying  Proxy  Statement  for further
information regarding each proposal to be made.

All  stockholders  are asked to complete,  sign and date the enclosed  proxy and
return it promptly by mail in the enclosed self-addressed  envelope,  which does
not require postage if mailed in the United States.

                                             By Order of the Board of Directors


                                             Dennis Marino
                                             Secretary

September 9, 1998
Jersey City, New Jersey



<PAGE>




                         National Discount Brokers Group, Inc.
                                10 Exchange Place Centre
                             Jersey City, New Jersey 07302

           ------------------------------------------------------------------
                          Proxy Statement For Annual Meeting
           ------------------------------------------------------------------

This Proxy  Statement  is  furnished  by the Board of  Directors  (the "Board of
Directors") of National  Discount  Brokers Group,  Inc., a Delaware  corporation
(the  "Company"),  in connection with the  solicitation of proxies to be used at
the Annual Meeting of  Stockholders  (the "Meeting") to be held at the Company's
offices at 10 Exchange Place Centre,  Jersey City, New Jersey 07302, 15th Floor,
on  October  20,  1998 at 4:00 p.m.  New  Jersey  time,  and at any  adjournment
thereof.  This Proxy Statement and the  accompanying  Annual Report,  Notice and
Proxy are being  mailed to  stockholders  on or about  September  9,  1998.  The
principal  executive offices of the Company are located at the address indicated
above.

Only  stockholders of record at the close of business on the record date, August
28, 1998 (the "Record Date"), will be entitled to vote at the Meeting and at all
adjournments thereof.

On August 28,  1998,  there were  outstanding  and  entitled to vote  14,024,618
shares of the  Company's  common  stock,  $.01 par value per share (the  "Common
Stock").  Each outstanding share of Common Stock is entitled to one vote on each
matter to be voted upon.  A majority of the shares of Common  Stock  entitled to
vote at the Meeting will  constitute a quorum for the  transaction  of business.
Holders of Common Stock have no cumulative voting rights.


                               Voting Of Proxies

If a proxy is properly  signed by a stockholder  and is not revoked,  the shares
represented  thereby will be voted at the Meeting in the manner specified on the
proxy,  or if no manner is specified  with respect to any matter  therein,  such
shares  will be voted by the persons  designated  therein  (with  respect to the
matters as to which the  stockholder is entitled to vote) (a) "FOR" the election
of each of Arthur  Kontos,  Richard  J.  Marino  and Ralph N. Del Deo as Class 2
directors of the Company,  (b) "FOR" the ratification of the appointment of KPMG
Peat  Marwick  LLP as the  Company's  independent  auditors  for the fiscal year
ending May 31, 1999,  and (c) in connection  with the  transaction of such other
business as may properly be brought before the Meeting,  in accordance  with the
judgment of the person or persons  voting the proxy.  If any of the nominees for
director  is unable to serve or for good cause will not serve,  an event that is
not anticipated by the Company, the shares represented by the accompanying proxy
will be voted for a substitute  nominee  designated by the Board of Directors or
the  Nominating  Committee  thereof or the Board of Directors  may  determine to
reduce the size of the Board of Directors.

A proxy  may be  revoked  by the  stockholder  at any time  prior to the  voting
thereof  by giving  notice of  revocation  in writing  to the  Secretary  of the
Company,  by duly  executing  and  delivering  to the Secretary of the Company a
proxy bearing a later date or by voting in person at the Meeting.

Directors  of the  Company  will be  elected by a  plurality  of the vote of the
outstanding shares of Common Stock present,  in person or by proxy, and entitled
to vote at the  Meeting.  The  affirmative  vote of the  holders  of at  least a
majority of the  outstanding  shares of Common  Stock  present,  in person or by
proxy,  and entitled to vote at the Meeting is required for the ratification and
approval  of any  other  matter  which may be put to a  stockholder  vote at the
Meeting,  unless otherwise  required by the Delaware General  Corporation Law or
the Company's Restated Certificate of Incorporation,  as amended. Except for the
election of directors, as to any particular proposal,  abstentions will have the
same effect as a vote against that  proposal,  and broker  non-votes will not be
counted  as votes for or  against  the  proposal,  and will not be  included  in
counting the number of votes necessary for approval of the proposal. Votes cast,
either in person or by proxy,  will be  tabulated by American  Stock  Transfer &
Trust Company, the Company's transfer agent.


                     Voting Securities and Principal Holders Thereof

Security Ownership Of Certain Beneficial Owners

The  following  table sets forth  certain  information,  as of August 28,  1998,
regarding the  beneficial  ownership of the Common Stock by each person known by
the  Company  to be the  beneficial  owner  of more  than  five  percent  of the
outstanding  shares of the Common Stock.  The Company has been advised that each
stockholder  listed below has sole voting and dispositive  power with respect to
such shares unless otherwise noted in the footnotes following the table.
<TABLE>
<CAPTION>

                 Name and Address                    Amount
                 of Beneficial Owner             Of Beneficial Ownership          Percentage of Class
                                    



 
                  <S>                                   <C>                                   <C>   
                  S.G.I. Partners, L.P.
                  120 Broadway 
                  New York, NY 10271                    4,000,000                             28.52%

                  Carl H. Hewitt
                  120 Broadway
                  New York, NY 10271                    4,000,000 (1)                         28.52%

                  Arthur Kontos
                  10 Exchange Place
                  Centre                                2,881,100 (2)                         20.26%
                  Jersey City, NJ 07302

                  Peter R. Kellogg
                  120 Broadway
                  New York, NY 10271                    2,665,200 (3)                         19.00%

<FN>

(1)  Comprised  of  4,000,000  shares of Common  Stock  held by S.G.I.  Partners,  L.P.  ("S.G.I.").  See  "Certain
      Relationships and Related Transactions."
</FN>
<FN>

(2)   Comprised  of  1,337,854  shares of Common  Stock  held by Mr.  Kontos and
      197,387  shares  of  Common  Stock   underlying   Mr.  Kontos'   currently
      exercisable  stock options.  Also includes  125,000 shares of Common Stock
      held by the Arthur Kontos Foundation,  778,562 shares of Common Stock held
      by limited partnerships of which Mr. Kontos is the general partner and Mr.
      Kontos' children are sole limited partners,  and 442,297 shares over which
      he has sole voting  power which are  subject to a voting  trust  agreement
      with his former wife.
</FN>
<FN>

(3)   Comprised of 793,700 shares of Common Stock held by Mr. Kellogg, 1,850,000
      shares  of  Common  Stock  held  by  IAT  Reinsurance  Syndicate  Ltd.,  a
      corporation, all of whose voting stock is held by Mr. Kellogg and of which
      Mr.  Kellogg is  president,  and 21,500 shares of Common Stock held by the
      Cynthia and Peter Kellogg  Foundation.  Peter R. Kellogg is also a limited
      partner of S.G.I and a Senior Managing Director of Spear, Leeds & Kellogg,
      L.P. ("SLK"), a New York limited partnership.
</FN>


</TABLE>





Security Ownership of Management

The  following  table sets forth  certain  information,  as of August 28,  1998,
regarding  the  beneficial  ownership of the Common  Stock by each  director and
named executive officer (see "Compensation of Directors and Executive Officers")
of the Company  and by all  directors  and  executive  officers as a group.  The
Company has been advised that each stockholder  listed below has sole voting and
dispositive  power with  respect to such shares  unless  otherwise  noted in the
footnotes  below.  Sherwood  Securities  Corp.  ("Sherwood   Securities")  is  a
wholly-owned  subsidiary of the Company  specializing  in the  wholesale  market
making of over-the-counter securities.  Equitrade Partners ("Equitrade"),  a New
York  limited  partnership,  is an  affiliate  of the  Company,  which acts as a
specialist  on The New York Stock  Exchange.  The  Company and one of its wholly
owned  subsidiaries  own an  aggregate  of  approximately  73% of the capital of
Equitrade.
<TABLE>
<CAPTION>

                                                               Amount
               Name and Title                          Of Beneficial Ownership     Percentage of Class

               <S>                                        <C>                              <C>   
               Arthur Kontos,                             2,881,100 (1)                    20.26%
               Vice Chairman of the Board and Chief
               Executive Officer of the Company

               James H. Lynch, Jr., Chairman of the          35,000                           *
               Board and Director

               John P. Duffy, Director                       53,800 (2)                       *

               Carl H. Hewitt, Director                   4,000,000 (3)                    28.52%

               Dennis Marino,                               218,698 (4)                     1.56%
               Executive Vice President and Chief
               Administrative Officer of the Company;
               Chairman of the Board and Chief
               Executive Officer of National Discount
               Brokers

               Richard J. Marino,                           607,635 (5)                     4.33%
               Chairman of the Board of Sherwood
               Securities

               Thomas W. Neumann,                           224,810 (6)                     1.59%
               Executive Vice President of the Company;
               President of Sherwood Securities

               Ralph N. Del Deo, Director                    30,000 (7)                       *

               James Romano,                                 15,000 (8)                       *
               Senior Vice President and Head of
               Capital Markets of Sherwood Securities

               Stephen J. DiLascio                            1,000                           *
               Director, Managing General Partner of
               Equitrade

               All Directors and Executive Officers as    8,077,176                        56.22%
               a Group (12  persons) (9)

                   * Less than 1%

<FN>

         (1)  Consists of 1,337,854  shares of Common Stock held by Mr.  Kontos,
         197,387  shares  of  Common  Stock  underlying  Mr.  Kontos'  currently
         exercisable  stock options,  125,000 shares of Common Stock held by the
         Arthur  Kontos  Foundation,  778,562  shares  of Common  Stock  held by
         limited partnerships of which Mr. Kontos is the general partner and Mr.
         Kontos'  children  are sole limited  partners  and 442,297  shares over
         which he has only sole voting power which are subject to a voting trust
         agreement with his former wife.
</FN>
<FN>

         (2)  Consists of 49,800  shares of Common  Stock held by Mr.  Duffy and
         4,000 shares of Common Stock held in trust for Mr. Duffy's children.
</FN>
<FN>

         (3) Consists of 4,000,000  shares of Common Stock held by S.G.I.  See "Certain  Relationships  and Related
         Transactions."
</FN>
<FN>

         (4)  Consists of 180,732  shares of Common  Stock held by Mr. D. Marino
         and 37,966 shares of Common Stock underlying Mr. D. Marino's  currently
         exercisable stock options.
</FN>
<FN>

         (5)  Consists of 597,466  shares of Common  Stock held by Mr. R. Marino
         and 10,169 shares of Common Stock underlying Mr. R. Marino's  currently
         exercisable stock options.
</FN>
<FN>

         (6) Consists of 144,436  shares of Common Stock held by Mr. Neumann and
         80,374  shares of  Common  Stock  underlying  Mr.  Neumann's  currently
         exercisable stock options.
</FN>
<FN>

         (7)  Consists  of 20,000  shares of Common  Stock held by Mr. Del Deo and  10,000  shares of Common  Stock
         held by his wife.
</FN>
<FN>

         (8)  Consists of 5,000  shares of Common  Stock held by Mr.  Romano and
         10,000  shares  of  Common  Stock  underlying  Mr.  Romano's  currently
         exercisable stock options.
</FN>
<FN>

         (9) Includes  343,229 shares of Common Stock  underlying  stock options
         exercisable within 60 days of August 28, 1998.
</FN>
</TABLE>


PROPOSAL 1.  ELECTION OF DIRECTORS

The Company's Restated  Certificate of Incorporation,  as amended,  which became
effective on February 4, 1987,  requires  that the Board of Directors be divided
into three classes.  In accordance  with the Company's  Restated  Certificate of
Incorporation,  at the 1987 annual  meeting,  Class 1 directors  were  initially
elected  for  a  term  that  expired  as of  the  1988  annual  meeting  of  the
stockholders of the Company, Class 2 directors were initially elected for a term
that expired as of the 1989 annual meeting of stockholders and Class 3 directors
were initially  elected for a term that expired as of the 1990 annual meeting of
stockholders.  At each annual  meeting,  directors will be elected for a term of
three years so that the term of office of one class of  directors  shall  expire
each year.

Three  individuals  are being  nominated for election at the Meeting to serve as
Class  2  directors  for a term  of  three  years  or  until  the  election  and
qualification of their successors.

The affirmative  vote of the holders of a plurality of the shares of Common
Stock voted in person or by proxy at the Meeting is required for the election of
each director.  Unless otherwise directed, each proxy executed and returned by a
stockholder  will be voted for the election of Arthur Kontos,  Richard J. Marino
and Ralph N. Del Deo. If Mr. Kontos, Mr. Marino or Mr. Del Deo becomes unable to
serve or for good cause will not serve,  an event that is not anticipated by the
Company,  (i)  the  shares  represented  by the  proxies  will  be  voted  for a
substitute nominee or substitute  nominees  designated by the Board of Directors
or the  Nominating  Committee  of the  Board of  Directors  or (ii) the Board of
Directors may  determine to reduce the size of the Board of  Directors.  At this
time, the Board of Directors  knows of no reason why Mr. Kontos,  Mr. Marino and
Mr. Del Deo may not be able to serve as  directors  if  elected.  Pursuant to an
agreement  between the  Company  and S.G.I.,  S.G.I has the right to appoint two
directors to the Board of Directors.  S.G.I. has designated Mr. Hewitt as one of
its directors and has not requested that another  person be designated  pursuant
to this agreement.
The Board of Directors recommends a vote "FOR" the election of each of the above
nominees.

The name and age of each of the  nominees  and each of the  incumbent  directors
whose term will continue following the Meeting,  their respective positions with
the Company and the period  during  which each such  individual  has served as a
director are set forth below.  Additional  biographical  information  concerning
each of the nominees and each of the incumbent  directors and executive officers
of the Company follows the table.
<TABLE>
<CAPTION>

           Name                             Age       Position with the Company                  Director Since

           <S>                              <C>        <C>                                             <C>
           Class 1 Directors

           Dennis Marino                    52         Director, Executive Vice President,             1981
                                                       Secretary and Chief Administrative Officer

           James H. Lynch, Jr.              67         Chairman of the Board                           1989

           Stephen J. DiLascio              43         Director, Managing General Partner of           1995
                                                       Equitrade

           Class 2 Directors

           Arthur Kontos                    52         Director, Vice Chairman of the Board,           1988
                                                       Chief Executive Officer

           Richard J. Marino                54         Director, Senior Vice President, Chairman       1981
                                                       of the Board of Sherwood Securities

           Ralph N. Del Deo                 73         Director                                        1993

           Class 3 Directors

           Carl H. Hewitt                   46         Director                                        1991

           John. P. Duffy                   57         Director                                        1992

           Thomas W. Neumann                34         Director, Executive Vice President              1992



</TABLE>





Certain Biographical Information Concerning
Incumbent Directors and Executive Officers

James H. Lynch, Jr. became Chairman of the Board of Directors in July 1989.
He is also an independent consultant to the securities industry. Mr. Lynch was a
general partner and member of the Executive  Committee of SLK for more than five
years prior to his retirement  from SLK in June 1985. SLK is a broker dealer and
a member of all major United States stock  exchanges and acts as a specialist on
the New York and American Stock Exchanges. Mr. Lynch also served as President of
Spear,  Leeds & Kellogg  Securities,  Inc. and as an officer and director of its
wholly-owned   subsidiaries,   First  Options  of  Chicago  and  Troster  Singer
Corporation.  Mr. Lynch is a director of Consolidated  Purchasing Services, Inc.
and Business Link Communications, Inc.

Arthur Kontos became Vice Chairman of the Board and Chief  Executive  Officer of
the Company in October 1988. Mr. Kontos was a managing director of SLK from June
1988 until October 1988, when he joined the Company. He became a general partner
of SLK in 1982 and President of S.G.I. Capital Holdings, Inc., a general partner
of S.G.I.  in 1988, from which positions he resigned in December 1991. From July
1978 until May 1988,  Mr. Kontos served as a director and as President and Chief
Executive Officer of Troster Singer Corporation, currently a division of SLK.

Richard J. Marino is a founder of Sherwood Securities,  a subsidiary of the
Company,  and was  Secretary of Sherwood  Securities  from its inception in 1968
until June 1988. In August 1987, Mr. Marino was elected Chairman of the Board of
Sherwood Securities.  In January 1988, he assumed the responsibility of director
of all equity trading.  In April 1988, he ceased his individual trading activity
to serve full time as director of all equity trading. In August 1988, Mr. Marino
returned to trading a list of  securities.  Mr. Richard J. Marino and Mr. Dennis
Marino are brothers.

Dennis  Marino has been  employed by the  Company  since  February  1969 and has
served  as  the  Company's  Chief  Administrative  Officer  since  1986.  He was
appointed  President of Sherwood  Securities in January 1988, a position he held
until  December  1997 at which  time he became  Chairman  of  National  Discount
Brokers ("NDB"), a wholly owned subsidiary of the Company. In February 1998, Mr.
Marino also assumed the  positions of President and Chief  Executive  Officer of
NDB. He has been an  Executive  Vice  President of the Company  since 1977.  Mr.
Marino served as President of the Securities Traders Association of New York for
a term that  expired  in 1991,  served as  Chairman  of the  Securities  Traders
Association ("STA") in 1997 and currently serves as a governor of the STA and as
a member of its executive committee.

Thomas W. Neumann has served as an Executive Vice President of the Company since
1991 and was appointed  President of Sherwood  Securities in December  1997. Mr.
Neumann  joined  Sherwood  Securities  in October 1988 and held various  trading
positions with that company prior to being  appointed a senior vice president in
1990 and Head of Capital Markets in 1995. From June 1986 until October 1988, Mr.
Neumann was an employee of Troster Singer Corporation.

John P. Duffy retired from his position as a managing director of SLK in 1991, a
position  he held  from  prior to  September  1987  until his  retirement.  As a
managing  director of SLK, Mr. Duffy acted as a specialist on The New York Stock
Exchange ("NYSE"). Mr. Duffy is also a director of Kinney Oil Co.

Carl H.  Hewitt was  appointed  a director of the Company at the request of
S.G.I.  under the terms of an agreement between the Company and S.G.I.  pursuant
to which S.G.I.  has the right to designate two  directors.  Mr. Hewitt became a
member of the Board of Directors in July 1991. Mr. Hewitt is a managing director
and the general  counsel of SLK. Mr.  Hewitt  joined SLK in 1985 as an assistant
general  counsel.  He became  the  general  counsel  in June  1988 and  became a
managing  director in January 1991. Mr. Hewitt is also the sole  shareholder and
director  and the  president  of the  corporation  which  serves as the  general
partner of S.G.I.

Ralph N. Del Deo is a senior partner of Gibbons,  Del Deo,  Dolan,  Griffinger &
Vecchione,  P.C.,  a New Jersey law firm that  provides  legal  services  to the
Company.  His practice  areas include  corporation  law,  patent,  trademark and
copyright law, litigation and general practice.

Stephen J. DiLascio is the managing partner of Equitrade. He began his career on
the trading floor in 1973 with Weiss, Peck & Greer's specialist  operation,  the
predecessor to Equitrade.  He became a specialist in 1978, a partner in 1980 and
the managing partner in 1989. As the managing partner, he is responsible for all
aspects of  Equitrade's  operations.  Mr.  DiLascio is a director of  Securities
Industry  Automation  Corporation,  a  governor  of the  NYSE,  a member  of the
Alliance of Floor Brokers and a member of the Technology, Planning and Oversight
Committee at the NYSE.

James  Romano,  age 51,  currently  serves as Senior Vice  President and Head of
Capital Markets of Sherwood Securities. Mr. Romano joined Sherwood Securities in
June  1992 as vice  president  of  trading  and as a  member  of the  Management
Committee. In January 1995, he was appointed to serve on the Company's Executive
Committee.  From January 1995 to December  1997,  Mr. Romano had  responsibility
over the trading  department and in January 1998 became Head of Capital Markets.
For eleven years prior to joining the Company,  Mr. Romano held various  trading
positions at Troster Singer Corporation, including vice president of trading.

Laura R. Singer, age 44, has been General Counsel and Senior Vice President
of the Company  since  January 6, 1997.  Prior to that time,  she served for six
years as an Assistant  Director in the Division of Enforcement of the Securities
and Exchange  Commission in  Washington,  D.C.  Previously,  Ms. Singer had been
Counsel  to  Market  Surveillance  at the  National  Association  of  Securities
Dealers. Ms. Singer has been a member of the bar since September,  1978. She has
responsibility for the legal affairs of the Company.

Denise  Isaac,  age 31, has been Chief  Financial  Officer of the Company  since
October 1995.  Prior to her employment with the Company,  Ms. Isaac was a Senior
Manager in the financial  services  practice of KPMG Peat Marwick LLP. Ms. Isaac
was  employed  by KPMG Peat  Marwick  LLP since 1986 where she worked on various
assignments and taught courses to the securities industry.


Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities  Exchange Act of 1934, as amended,  requires the
Company's  executive  officers and directors,  and persons who  beneficially own
more than ten percent of a registered class of the Company's  equity  securities
to file reports of ownership and changes in ownership  with the  Securities  and
Exchange Commission and The New York Stock Exchange. Based solely on a review of
the copies of reports furnished to the Company and written  representations from
the Company's  executive  officers,  directors and persons who  beneficially own
more than ten percent of the Company's equity  securities,  the Company believes
that,  during the  preceding  year,  all filing  requirements  applicable to its
officers,  directors  and ten  percent  beneficial  owners  were  met,  with the
exception that the monthly statement of change in beneficial  ownership (Form 4)
was not filed by John Duffy on a timely basis. Appropriate corrective action has
been taken by this individual.


Meetings of the Board and Committees

During fiscal year 1998, the Board of Directors  held six meetings.  Each of the
directors attended at least 75% of the aggregate of all meetings of the Board of
Directors and the total number of meetings  held by all  committees of the Board
of Directors of which each  respective  director was a member during the time he
was serving as such during the fiscal year ended May 31, 1998.

The Board of Directors has created an Executive  Committee,  a Compensation
Committee,  an  Audit  Committee,  and a  Nominating  Committee.  The  Executive
Committee is comprised of James H. Lynch,  Jr., Arthur Kontos and Dennis Marino.
The  Compensation  Committee is comprised of James H. Lynch, Jr. and John Duffy.
The Audit  Committee  is comprised  of James H. Lynch,  Jr. and John Duffy.  The
Nominating  Committee is comprised of Arthur Kontos,  Carl H. Hewitt and John P.
Duffy.

The  Executive  Committee,  which held two meetings  during fiscal year 1998, is
authorized,  among  other  things,  to exercise  such powers as may  lawfully be
delegated  to it by  the  Board  of  Directors,  including  the  appointment  of
officers,  the appointment of agents of the Company,  and the  determination  of
general  policy with regard to business of the Company.  Action by the Executive
Committee is subject to review and revision by the Board of Directors.

The Compensation  Committee,  which held three meetings during fiscal year 1998,
has  jurisdiction  on behalf of the  Company to approve,  disapprove,  modify or
amend all plans to  compensate  employees  including  bonuses.  No member of the
Compensation  Committee is eligible for any award or any grant of stock  options
under any such plans.  The  Compensation  Committee  determines  the salaries of
employees of the Company who are directors and also  determines  the salaries of
all other  employees  of the Company  who are  officers or who occupy such other
positions as may be designated by the Compensation Committee.

The Audit Committee, which held one meeting during fiscal year 1998, reviews and
monitors the Company's  financial  reports and  accounting  practices and, among
other things, makes  recommendations to the Board with respect to audit policies
and  procedures  and the  scope and  extent of  audits,  reviews  the  Company's
unaudited  quarterly  financial  results,  and reviews the annual year end audit
with the Company's independent auditors.

The  Nominating  Committee  was created by the Board of Directors in August 1993
for the purpose of  nominating  a slate of nominees for election to the Board of
Directors  by  the  stockholders  of the  Company  at  each  Annual  Meeting  of
Shareholders  commencing with the annual meeting of  stockholders  held in 1994.
The Nominating  Committee is also responsible for nominating  candidates to fill
the position of each director,  if any, whose term as director  terminates prior
to the date of any annual meeting of  stockholders  and who is to be replaced by
the Board of Directors.  The  Nominating  Committee  does not consider  nominees
recommended by stockholders in its deliberations. The Nominating Committee held 
no meetings in fiscal year 1998.


                    Compensation Of Directors And Executive Officers

The following table sets forth  information  concerning the annual and long-term
compensation  for services in all capacities to the Company and its subsidiaries
for each of the fiscal years ended May 31, 1998,  1997 and 1996 of those persons
who were, at May 31, 1998,  (i) the Chief  Executive  Officer and (ii) the other
four most highly  compensated  executive  officers of the Company for the fiscal
year ended May 31, 1998 (the "named executive officers"):


<TABLE>
<CAPTION>




                                     Executive Compensation Table

                                                         Annual Compensation

                                           ----------- ---------------- ----------------- -------------------
Name and                                                                                    Securities
Principal                     Fiscal                                      All Other         Underlying
Position                      Year         Salary($)    Bonus($)        Compensation($)     Options (#)
                                                       


<S>                           <C>           <C>         <C>                <C>                 <C>    
Arthur Kontos, Vice           1998          $300,000    $3,479,439          $515,568(2)        126,941
Chairman of the Board and     1997           300,000     3,061,460
Chief Executive Officer of    1996           300,000     6,137,012         7,119,375(2)        219,533
the Company

Dennis Marino                 1998           173,077       350,000           175,075(2)         42,966
Executive Vice President      1997           150,000       286,728
and Chief Administrative      1996           150,000       515,000           663,181(2)         45,190
Officer of  the Company;
Chairman of the Board and
Chief Executive Officer of
National Discount
Brokers

Thomas Neumann                1998           299,039       802,000(3)        181,886(2)         85,374
Executive Vice President of   1997           250,000       573,455           113,699(2)         88,187
the Company; President of     1996           248,939     1,015,000         1,093,376(2)         94,027
Sherwood Securities

Richard J. Marino             1998                --       732,816(1)         53,786(2)         10,169
Chairman of the Board of      1997                --       614,606(1)
Sherwood Securities           1996                --       486,654(1)        196,875(2)         12,294

James Romano                  1998           350,000       250,000(1)                            5,000
Senior Vice President and     1997           350,000       235,000(1)                           15,000
Head of Capital Markets of    1996           350,000       274,091(1)
Sherwood Securities

No named executive officer received personal benefits or perquisites  during the
fiscal  year ended May 31, 1998 in excess of the lesser of $50,000 or 10% of his
aggregate salary and bonus.
<FN>

(1)     Cash  bonuses  for Mr. R.  Marino and Mr.  Romano  include  commissions,
        representing  a percentage of gross  commissions  on  sales/trades,  and
        discretionary  incentive bonuses.  Commissions for Mr. R. Marino for the
        fiscal year ended May 31, 1998 equaled $732,816  (including  $167,297 of
        commissions earned in excess of Mr. Marino's guarantee),  for the fiscal
        year ended May 31, 1997  equaled  $614,606 and for the fiscal year ended
        May 31, 1996 equaled $477,904.  Discretionary  incentive bonuses for Mr.
        R.  Marino for the fiscal  year ended May 31,  1998  equaled $0, for the
        fiscal year ended May 31, 1997  equaled $0 and for the fiscal year ended
        May 31, 1996 equaled  $8,750.  Commissions for Mr. Romano for the fiscal
        year  ended  May 31,  1996  equaled  $91,091  and he was  not  paid on a
        commission  basis for the  fiscal  years  ended  May 31,  1998 and 1997.
        Discretionary incentive bonuses for Mr. Romano for the fiscal year ended
        May 31, 1998  equaled  $250,000,  for the fiscal year ended May 31, 1997
        equaled  $235,000  and for the fiscal  year ended May 31,  1996  equaled
        $183,000.
</FN>
<FN>

(2) Represents gain recognized upon exercise of options.
</FN>
<FN>

(3)      Includes $107,000 of bonus paid in fiscal year ended May 31, 1998 with
         respect to services performed in the fiscal year ended May 31, 1997.
</FN>
</TABLE>


Compensation Arrangements

Through May 31, 1997, Mr. Kontos was  compensated by the Company  pursuant to an
Employment Agreement (the "Employment  Agreement") by and between Mr. Kontos and
the Company  dated as of September 12, 1995.  Under the terms of the  Employment
Agreement,  the  Company  had agreed to pay Mr.  Kontos an annual base salary of
$300,000. In addition, Mr. Kontos was entitled to a bonus ("Bonus") based on the
Company's "Income." "Income" is defined in the Employment  Agreement to mean the
Company's  consolidated  pre-tax net income  during any fiscal year in which the
Employment  Agreement is in effect without any deductions for amounts payable as
a Bonus under the Employment Agreement or any related accruals. For fiscal years
commencing  with the fiscal year ended May 31, 1996,  Mr. Kontos was entitled to
an annual Bonus based on performance goals,  therein defined as 10% of the first
$5,000,000 of Income, 15% of the next $8,000,000 of Income and 18% of the Income
over $13,000,000. In March 1996, Mr. Kontos signed a waiver wherein his Bonus on
any Income over  $19,746,019,  for the fiscal year ended May 31, 1996,  would be
paid at a rate of 15%, rather than 18%.

On May 31, 1997, the Board of Directors  approved,  and Mr. Kontos signed, a new
employment  agreement,  (the "New  Employment  Agreement").  The New  Employment
Agreement  provides for an initial term of  employment  from June 1, 1997 to May
31, 2000.  The Company has the option to extend the term from June 1, 2000 until
May 31, 2001.  Mr.  Kontos has the right to extend the term from June 1, 2001 to
May 31, 2002. The New Employment Agreement provides that Mr. Kontos will receive
an annual base salary of $300,000 and an annual cash bonus pursuant to the terms
of The Sherwood  Group 1996 CEO Bonus Plan (the "CEO Bonus  Plan").  Pursuant to
the CEO Bonus Plan, for fiscal years  commencing  with the fiscal year ended May
31, 1998,  the Chief  Executive  Officer of the Company is entitled to an annual
cash  bonus  equal  to 10% of the  first  $10,000,000  of  "Income,"  and 15% of
"Income" over $10,000,000. "Income" means the consolidated pre-tax net income of
the Company  without  deductions for the payment or accrual of a bonus under the
CEO Bonus Plan. The New Employment Agreement may be terminated (i) by Mr. Kontos
either on thirty  (30) days  prior  written  notice or at any time  following  a
Change in Control, as defined, (ii) by the Company for Cause, as defined,  (iii)
automatically upon the death or disability of Mr. Kontos, or (iv) by the Company
without Cause. If the Company  terminates the New Employment  Agreement  without
Cause,  or Mr. Kontos  terminates  his  employment  for Good Reason (as defined)
within one year after a Change of Control,  Mr. Kontos is entitled to receive as
liquidated  damages  an amount  equal to three  times his  average  compensation
(including base salary,  bonus and any other  compensation) from the Company and
its  subsidiaries  as reported  for  federal  income tax  purposes  for the five
previous  calendar  years less $1.00 subject to the  limitation  that the amount
shall not  constitute  an excess  parachute  payment  under  Section 280G of the
Internal Revenue Code of 1986, as amended.  Generally,  a Change in Control will
be deemed to have occurred under the New Employment  Agreement (i) if any person
(other than Mr.  Kontos or persons under his control) or group acting in concert
acquires  beneficial  ownership  of more  than  50% of the  voting  stock of the
Company and the control so acquired is  exercised  in any manner,  (ii) during a
two year period  persons who at the beginning of the period who  constitute  the
Board of Directors and any new director  whose election was approved by at least
2/3 of the directors then still in office,  cease for any reason to constitute a
majority of the Board of Directors,  or (iii) the Company or a subsidiary of the
Company merges,  consolidates or engages in a similar transaction,  other than a
transaction  where voting  securities of the Company  outstanding  prior to this
Transaction continue to represent 75% of the combined voting power of the voting
securities of the Company or the surviving entity, or the stockholders approve a
plan of complete  liquidation or an agreement for the sale or disposition of all
or substantially all of the Company's assets.

During the fiscal year ended May 31, 1997, the three highest salaried executives
received  cash  bonuses  pursuant to The Sherwood  Group,  Inc.  1996  Executive
Incentive Award Plan ("Incentive Plan"). Only three participants (other than the
Chief  Executive  Officer of the  Company)  with the highest  base salary for an
Award Period were eligible for the receipt of an Incentive Award. Generally, the
Award Period was the Company's  fiscal year. The Incentive Plan was administered
by the Compensation Committee. Participating senior executives could not receive
an Incentive Award in excess of 25% of the Compensation  Pool (as defined),  and
the  participating  senior  executive  with the highest  base  salary  could not
receive  an  Incentive  Award in excess  of 50% of the  Compensation  Pool.  The
Compensation  Pool was 4.25% of "Net  Income"  for an Award  Period  where  "Net
Income" meant consolidated pre-tax net income of the Company after adjustment to
exclude or include unusual, infrequently occurring or extraordinary items or the
cumulative  effects of  changes in  accounting  principles  and not taking  into
account the payment or accrual of the Incentive Awards under the Incentive Plan.
Messrs.  Neumann and Dennis Marino were  participants  in the Incentive Plan for
the fiscal year ended May 31, 1997.  The  Incentive  Plan was  terminated by the
Board of Directors effective June 1, 1997 and was not applicable to bonuses paid
to executives with respect to the fiscal year ended May 31, 1998.


Compensation of Directors

Independent  directors  are paid at a rate of $18,000  annually  plus $1,000 for
each committee meeting attended.


Option Grants in Last Fiscal Year

Shown below is information  with respect to the options to purchase Common Stock
granted to the Chief Executive  Officer and the named executive  officers of the
Company.
<TABLE>
<CAPTION>

                        Option Grants In Last Fiscal Year

                                                                                                          Potential Realizable
                                                                                                         Value at Assumed Annual
                                                                                                          Rates of Stock Price
                                         Individual Grants                                               Appreciation for Option
                                                                                                                  Term
----------------------------------------------------------------------------------------------------    --------------------------
                           Number of         % of Total
                           Securities     Options Granted
                           Underlying     to Employees in   Exercise or Base
                        Options Granted     Fiscal Year           Price             Expiration
         Name                 (#)                                 ($/Sh)               Date              5% ($)        10% ($)
         ----                 ---                           -     ------               ----              ------        -------

<S>                           <C>             <C>                <C>                <C>                 <C>            <C>        
Arthur Kontos(1)              126,941         23.88%             $12.1875           10/14/07            $972,959       $2,465,669
                                                                            

Dennis Marino(2)               37,966          7.14               12.6875           12/04/07             302,935          767,696
             (3)                5,000           .94               13.5000           12/12/07              42,450          107,578


Thomas W. Neumann(1)           80,374         15.12               12.1875           10/14/07             616,039        1,561,163
                 (3)            5,000           .94               13.5000           12/12/07              42,450          107,578


Richard J. Marino(4)           10,169          1.91               13.2500           12/10/07              84,737          214,740

James Romano(3)                 5,000           .94               13.5000           12/12/07              42,450          107,578
                            

<FN>
(1) All options granted became exercisable on April 14, 1998.
</FN>


<FN>
(2) All options granted became exercisable on June 4, 1998.
</FN>

<FN>
(3)      All options granted will become  exercisable  with respect to one-third
         of the shares on each of the first, second and third anniversary of the
         date of grant.
</FN>

<FN>
(4) All options granted became exercisable on June 10, 1998.
</FN>
</TABLE>


Option Exercises and Fiscal Year-End Values

Shown below is  information  with respect to the exercise of options to purchase
Common Stock by the Chief Executive Officer and the named executive officers and
unexercised  options to  purchase  shares of Common  Stock  granted to the Chief
Executive Officer and such named executive officers.
<TABLE>
<CAPTION>

          Aggregated Option Exercises In Fiscal Year Ended May 31, 1998
                          And May 31, 1998 Option Value

                                                                Number of Unexercised           Value of Unexercised
                                                                      Options at                In-the-money Options
                          Number of Shares        Value            Fiscal Year-End             at Fiscal Year-End(1)
         Name           Acquired on Exercise     Realized      Exercisable Unexercisable    Exercisable     Unexercisable
                                                                            

<S>                            <C>              <C>              <C>                <C>       <C>                <C>
Arthur Kontos, Vice            149,087          $515,568         197,387            0         $158,504           0
Chairman of the Board       
and Chief Executive                                         
Officer of the Company

Dennis Marino                   45,190           175,075          37,966        5,000                0           0   
Executive Vice                                               
President and Chief                                          
Administrative
Officer of the
Company; Chairman of
the Board and Chief
Executive Officer of
National Discount
Brokers

Thomas W. Neumann               88,187           181,886          80,374        5,000                0           0
Executive Vice                                               
President of the                                             
Company, President of
Sherwood Securities

Richard J. Marino               12,294            53,786               0       10,169                0           0
Chairman of the Board                                       

James Romano                         0                 0           5,000       15,000                0           0
Senior Vice President                                       
and Head of Capital                                          
Securities




<FN>

(1)      Based on the  difference  between the exercise price of the options and
         the closing price of the Common Stock on the New York Stock Exchange on
         May 31, 1998.
</FN>
</TABLE>


<PAGE>


             Compensation Committee Report On Executive Compensation

General

The  Compensation  Committee  of the Board of  Directors  reviews the  Company's
existing and proposed executive  compensation plans and makes recommendations to
the  Board  of  Directors  regarding  such  plans  and  the  awards  to be  made
thereunder.

Set  forth  below is a  discussion  of the  Company's  compensation  philosophy,
together  with  a  discussion  of the  factors  considered  by the  Compensation
Committee in determining the  compensation of the Company's Vice Chairman of the
Board and Chief  Executive  Officer and other named  executive  officers in this
Proxy Statement for the fiscal year ended May 31, 1998.

Members  of the  Compensation  Committee  during the  fiscal  year ended May 31,
1998 were John P. Duffy and James H. Lynch, Jr.

Each of Sherwood  Securities and Equitrade  cleared certain of their  securities
transactions with SLK. Each of Messrs. Hewitt and Kellogg are managing directors
of SLK. Messrs.  Lynch and Duffy were formerly associated with SLK. See "Certain
Biographical Information Concerning Incumbent Directors and Executive Officers."
During the Company's  1998 fiscal year,  the Company and its  subsidiaries  paid
fees in the aggregate  amount of  $1,884,010 to SLK in connection  with clearing
activities  performed by SLK. On February 27, 1998, Sherwood Securities sold its
American Stock Exchange specialist business to SLK for $325,000.

Compensation Philosophy

The  Company's  compensation  philosophy  focuses on providing  executives  with
annual  compensation that rewards  individual  performance  during the year, and
provides  incentives to executives to improve the long-term  performance  of the
Company. By paying competitive base salaries to executive officers, and making a
significant portion of their compensation contingent on their performance during
the year, the Company seeks to provide executives with significant incentives to
promote the interests of the Company and its stockholders.

Salaries.  Consistent  with its  compensation  philosophy,  the Company has paid
competitive base salaries to its salaried  officers and has  supplemented  these
salaries  with  performance-based  bonuses.  Traders  generally  receive no base
salaries, and are compensated on a commission basis with a minimum guarantee. In
making decisions with respect to the base salaries of executive officers for the
fiscal year ended May 31, 1998, the committee considered the performance of each
of the individuals in question  during the prior year, the Company's  results of
operations  for the fiscal year ended May 31, 1997 and the  responsibilities  of
the  executive  officers.  In  keeping  with  its  desire  to  base  much of the
compensation  of the Company's  executives on  performance  during the year, the
committee generally  determined to make only modest changes in the base salaries
of certain  executives,  and to maintain salaries for most executive officers at
the same level as the prior year.

Bonuses.  The discretionary  bonuses paid to the Company's officers with respect
to the fiscal year ended May 31, 1998 were determined  primarily by reference to
the Company's financial  performance for the fiscal year and by reference to the
volume of business  generated by them or under their direction during the fiscal
year.  The  performance  of the  Company's  Vice Chairman of the Board and Chief
Executive Officer is measured primarily by reference to the Company's  financial
performance  for the fiscal year and is measured by a formula  contained  in his
New Employment Agreement.



Chief Executive Officer Compensation

The  compensation  arrangements  for Mr.  Kontos with respect to the fiscal year
ended May 31,  1998 were based on the  Company's  compensation  philosophy.  The
Compensation  Committee  determined  not to make any  adjustments to Mr. Kontos'
base  salary for the year,  in an effort to provide Mr.  Kontos with  additional
incentives to continue to improve the Company's  performance.  Mr. Kontos' bonus
with respect to the fiscal year ended May 31, 1998 was  determined in accordance
with the provisions of the New Employment Agreement.

                                                     THE COMPENSATION COMMITTEE


                                                     James H. Lynch, Jr.
                                                     John P. Duffy



Indemnification of Directors and Executive Officers

The Company has entered into  indemnification  agreements with its directors and
executive  officers  which  obligate the Company to indemnify  the  directors or
officers for all expenses (including attorney fees) and costs, judgments,  fines
and  settlement  amounts  paid or incurred by them in  connection  with  claims,
actions and  proceedings in which they are parties,  witnesses and subjects as a
result of their activities on behalf of the Company,  including, but not limited
to,  their  activities  as  directors  and  officers  of  the  Company  and  its
subsidiaries.  Pursuant to the agreements,  the directors will be indemnified to
the extent  permitted  under Delaware law. The agreements  cover all indemnified
claims and  proceedings  brought  within ten years after the  resignation of the
director or executive officer from all positions held as a director,  officer or
otherwise on behalf of the Company.  The agreements may provide  indemnity to or
limit  liability of directors  or  executive  officers for events that  occurred
prior  to the  date of the  agreement.  However,  the  enforceability  of  these
retroactive provisions has not been determined under Delaware law.


Stock Option Plan


In August 1995,  the Board of Directors  adopted The Sherwood  Group,  Inc. 1995
Stock Option Plan (the "1995 Stock Option  Plan") which plan was approved by the
stockholders  at the 1995 Annual Meeting of  Stockholders.  Under the 1995 Stock
Option Plan, 767,200 shares of Common Stock were authorized for issuance for the
granting of options and stock appreciation  rights. In August 1997, the Board of
Directors amended the 1995 Stock Option Plan to allow for an additional  420,000
shares of Common Stock to be authorized for issuance for the granting of options
and stock appreciation  rights.  This amendment was approved by the stockholders
at the 1997 Annual Meeting of Stockholders. The maximum number of shares subject
to stock  options  that may be granted to any one  optionee  during any calendar
year under the 1995 Stock Option Plan may not exceed  300,000  shares.  The 1995
Stock Option Plan provides for the granting of both incentive and  non-incentive
stock  options and stock  appreciation  rights which may be issued in connection
with a stock option.  At May 31, 1998,  163,930 shares were available for future
grant under the 1995 Stock  Option  Plan.  Options  covering  531,600  shares of
Common Stock were granted by the Company under the 1995 Stock Option Plan during
the fiscal year ended May 31, 1998.

401(k) Plan

In April 1992, the Company formed the Sherwood Securities Corp. 401(k) Plan (the
"401(k) Plan") which is a profit sharing plan qualified  under Section 401(k) of
the Code.  Under the terms of the 401(k) Plan,  all employees of the Company and
its  subsidiaries   (except  Equitrade)   employed  on  February  1,  1992  were
immediately  eligible  to  participate.  All other  employees  are  eligible  to
participate  in the 401(k)  Plan  after  completing  six  months of service  and
attaining  age 21.  Employees  may  elect to have  deductions  made  from  their
salaries and  contributed to the 401(k) Plan. In addition,  the Company may make
matching  contributions  to the 401(k) Plan in such amounts as may be determined
in the  discretion of the Board of  Directors.  During the fiscal year ended May
31, 1998, there was a discretionary  Company  contribution to the 401(k) Plan of
$82,013. Voting rights with respect to shares of Common Stock held in the 401(k)
Plan are voted at the  direction of the  Compensation  Committee of the Board of
Directors.

Equitrade sponsors,  for its eligible  employees,  the Equitrade Partners 401(k)
Savings Plan, which is a profit sharing plan,  qualified under Section 401(k) of
the Code. Equitrade contributes a matching contribution equal to one-half of the
first 4% of an employee's compensation.  In July 1997, Equitrade formed a second
plan,  the  Equitrade   Discretionary   Contribution   Plan  wherein   Equitrade
contributes  an additional 3% of the  employee's  compensation  for all eligible
employees  regardless  of whether the  employee  participates  in the  Equitrade
Partners  401(k)  Plan.  For the  fiscal  year  ended  May 31,  1998,  Equitrade
contributed a total of $165,780 to the two plans.



                     Certain Relationships And Related Transactions

S.G.I. Partners, L.P. On October 18, 1988, the Company closed a transaction
pursuant to a stock  purchase  agreement  whereby the Company issued and sold to
S.G.I.  Partners,  L.P. ("S.G.I."),  a Delaware limited  partnership,  2,193,600
shares of Common Stock. In addition,  the Company appointed Arthur Kontos,  then
the  president of the corporate  general  partner of S.G.I.,  as director,  Vice
Chairman of the Board and Chief Executive Officer of the Company effective as of
October 18, 1988. Mr. Kontos  resigned as President of S.G.I. as of December 31,
1991.  The  Company  also  agreed to use its best  efforts  to appoint up to two
individuals  designated  by S.G.I.  as  directors of the Company  subsequent  to
October 18, 1988, provided that S.G.I. continued to own in excess of one million
shares  of the  Company's  issued  and  outstanding  Common  Stock.  S.G.I.  has
designated Mr. Hewitt  pursuant to such  agreement.  Mr. Hewitt is the President
and sole shareholder and director of SHD Capital, Inc., the sole general partner
of S.G.I.

Thomas Neumann.  On March 24, 1993, the Company loaned to Thomas Neumann and his
wife the sum of $600,000 pursuant to the terms of a Secured Note, a Mortgage and
Security Agreement and a Construction Loan Agreement. The loan bears interest at
the rate of 5% per annum.  Interest accrued through August 15, 1993 was paid. On
or before  August 15, 1994 and on each August 15  thereafter  during the term of
the loan,  Mr.  Neumann is obliged to make  annual  payments  of  principal  and
interest in the  aggregate  amount of $40,000.  Such  payments have been made as
scheduled.  On July 23, 1997,  the foregoing  loan was converted  into a loan of
$378,544  secured by shares of Common  Stock owned by Mr.  Neumann and bearing a
rate of 5% per annum and containing the same amortization requirement.

Spear,  Leeds & Kellogg.  Each of  Sherwood  Securities  and  Equitrade  cleared
certain of their  securities  transactions  with SLK.  During the Company's 1998
fiscal year, the Company and its subsidiaries  paid fees in the aggregate amount
of $1,884,010 to SLK in connection with clearing activities performed by SLK. In
addition,  the Company has, from time to time, entered into short-term borrowing
facilities  with SLK for the purpose of  financing  trading  positions.  Certain
officers and directors of SLK are partners of S.G.I. As of May 31, 1998, no such
borrowings were outstanding.  On February 27, 1998, Sherwood Securities sold its
American Stock Exchange specialist business to SLK for $325,000.

Ralph N.  Del  Deo.  Mr.  Del Deo is a  senior  partner  in the law firm of
Gibbons,  Del Deo,  Dolan,  Griffinger & Vecchione,  P.C.,  which performs legal
services for the Company, and certain of its subsidiaries.

I.A.T.  Reinsurance  Syndicate  Ltd. On December 8, 1997,  the Company sold
1,500,000  shares of its treasury common stock to I.A.T.  Reinsurance  Syndicate
Ltd.,  an affiliate of Peter R.  Kellogg.  As of August 28,  1998,  Mr.  Kellogg
beneficially  owned 2,665,200  shares of the Company's common stock. Mr. Kellogg
is a limited partner of S.G.I. and a Senior Managing Director of SLK.



                               Company Performance

Set  forth  below  is a  line  graph  comparing  the  percentage  change  in the
cumulative total  stockholder  return on the Common Stock against the cumulative
total return of the S&P  Composite-500  Stock Index and the Dow Jones Securities
Brokers  Index ("D J Brokers  Index").  The graph  assumes that the value of the
investment  in the Common Stock and each index was $100 at May 31, 1993 and that
all dividends, if any, were reinvested.
<TABLE>
<CAPTION>

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE SHERWOOD GROUP, INC. THE S & P 500 INDEX
AND THE DOW JONES SECURITIES BROKERS INDEX


                                                                       Cumulative Total Return
                                               5/93          5/94          5/95          5/96          5/97          5/98
                                           ------------------------------------------------------------------------------------

<S>                                                  <C>           <C>           <C>           <C>           <C>           <C>
National Discount Brokers Group, Inc.                100           178           172           269           309           281

S & P Composite 500                                  100           104           125           161           208           272

Dow Jones Securities Brokers                         100           108           127           163           249           415

<FN>

*  $100  invested  on  5/31/93  in  stock  or index  including  reinvestment  of
   dividends.
</FN>
   Fiscal year ending May 31.
</TABLE>





<PAGE>



PROPOSAL 2.  RATIFICATION AND APPROVAL OF THE APPOINTMENT
                 OF INDEPENDENT AUDITORS

The Company, subject to stockholder ratification, has selected KPMG Peat Marwick
LLP to serve as its  independent  auditors  for the fiscal  year  ending May 31,
1999. If the stockholders do not ratify the appointment of KPMG Peat Marwick LLP
the Company may reconsider its selection.

A  representative  of KPMG Peat  Marwick  LLP is  expected  to be present at the
Meeting to respond to appropriate questions and will be given the opportunity to
make a statement if he or she desires to do so.

The affirmative  vote of the holders of a majority of the shares of Common Stock
of the  Company  present,  in person or by proxy,  and  entitled  to vote at the
Meeting is required  for the  ratification  and approval of the  appointment  of
auditors.

The Board of Directors  recommends a vote "FOR" ratification and approval of the
appointment of KPMG Peat Marwick LLP as independent auditors.



Stockholder Proposals For Next Annual Meeting

Any stockholder  proposals intended to be presented at the Company's next annual
meeting of  stockholders  must be  received  by the Company at its offices at 10
Exchange Place Centre, Jersey City, New Jersey 07302, on or before May 20, 1999,
for consideration for inclusion in the proxy material for such annual meeting of
stockholders.

Expenses Of Solicitation

The  cost of the  solicitation  of  proxies  will be borne  by the  Company.  In
addition to the use of the mails,  proxies may be solicited by regular employees
of the Company, either personally or by telephone or telegraph. The Company does
not expect to pay any  compensation  for the  solicitation  of proxies,  but may
reimburse  brokers  and other  persons  holding  shares in their names or in the
names of nominees for expenses in sending proxy  material to  beneficial  owners
and obtaining proxies of such owners.

Other Matters

The Board of Directors  does not intend to bring any matters  before the Meeting
other  than as stated in this Proxy  Statement,  and is not aware that any other
matters will be presented  for action at the Meeting.  If any other matters come
before the Meeting,  the persons  named in the enclosed  form of proxy will vote
the proxy with respect thereto in accordance with their best judgment,  pursuant
to the discretionary  authority granted by the proxy. Whether or not you plan to
attend  the  Meeting  in  person,  please  complete,  sign,  date and return the
enclosed proxy card promptly.

                                             By Order of the Board of Directors


                                             Dennis Marino
                                             Secretary

Dated:  September 9, 1998


<PAGE>


                                                         2


                             National Discount Brokers Group, Inc.

The undersigned  hereby  appoints Arthur Kontos,  Richard J. Marino and Ralph N.
Del Deo and each of them,  with full power of  substitution,  as proxies for the
undersigned,  to attend the annual meeting of stockholders of National  Discount
Brokers Group,  Inc. (the "Company"),  to be held at the Company's offices at 10
Exchange Place Centre,  Jersey City, New Jersey 07302, 15th Floor on October 20,
1998, at 4:00 p.m., New Jersey time, or any adjournment thereof, and to vote the
number of shares of common  stock of the Company that the  undersigned  would be
entitled  to vote,  and with all the power the  undersigned  would  possess,  if
personally present, as follows:

1.       /  / For or /  / Withhold Authority to vote for the following nominees
         ---         ---
         for election as Class 2 directors:        


                                     Arthur Kontos
                                    Richard J. Marino
                                    Ralph N. Del Deo

(Instruction:  To withhold authority to vote for any individual nominee, write
the nominee's name on the line provided below.)

---------------------------------



2.       Approval of the  appointment  of KPMG Peat Marwick LLP as the Company's
         independent auditors for the fiscal year ending May 31, 1999.

                   / / For or / / Against or / / Abstain

3.       In their discretion, on such other business as may properly come before
         the meeting or any adjournment thereof.



<PAGE>


         The  Proxies  will  vote as  specified  herein  or,  if a choice is not
specified,  they will vote For the  nominees  listed in Item 1, For the proposal
set  forth  in Item 2, and in  their  discretion  with  respect  to the  matters
referred to in Item 3.

         This Proxy is solicited by the Board of Directors of the Company.


                                Receipt  of the  Notice of Annual  Meeting  of  
                                Stockholders, Proxy Statement dated September 9,
                                1998 and Annual Report to Stockholders is hereby
                                acknowledged:
                                Date:___________________________________,  1998
                                -----------------------------------------------
                                -----------------------------------------------
                                -----------------------------------------------
                                                   (Signatures)
                               (Please sign exactly as your names appear hereon,
                                indicating, where proper, official position or
                                representative capacity.)