N.Y.S.E. Wants End to Cozy Enforcement
The New York Times
September 15, 2002
It may seem elementary that an enforcement officer ought to be independent
of the people whose behavior he is expected to monitor.
But that hasn't always been the case at many Wall Street brokerage firms.
The New York Stock Exchange is proposing to remedy the situation.
Its current newsletter says the exchange plans to eliminate the practice
of having stockbrokers supervise the compliance officers responsible
for overseeing the brokers' activity.
The newsletter said the proposal came after a review of "recent
cases in which managers and brokers at branch offices have used elaborate
schemes to steal from customers."
The exchange will require that "people who inspect branch offices are
independent from the supervision, control or bottom-line performance of those
offices," the newsletter said.
Under the proposal, brokerage firms would also have to improve
record-keeping of customer orders, safeguard the transmission of customer funds
and securities, and impose stricter time limits on order execution.
The exchange cited the case of Frank D. Gruttadauria, a branch manager
at Lehman Brothers in Cleveland, who was sued by the Securities and
Exchange Commission. The agency accused him of stealing
more than $40 million from 50 clients over six years.
Last month, he pleaded guilty to securities fraud, mail fraud, identity theft
and making false statements. Mr. Gruttadauria supervised the
compliance officer for the branch.
The stock exchange formally proposed the change in a filing on Aug. 16
with the Securities and Exchange Commission.
Jeff Sommer
nytimes.com
Copyright 2002 The New York Times |
