NYSE FLOORED
By RICHARD WILNER
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ROGUES' GALLERY: The big crackdown on illegal trading at the New York Stock Exchange yesterday looks familiar.
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April 13, 2005 -- Let the howls against self-regulation begin again.
The Securities and Exchange Commission's censuring of the New York Stock Exchange yesterday over its failure to police its floor specialists is re-igniting a storm of criticism over the Big Board's ability to police its own business.
Federal prosecutors charged 15 former NYSE traders with fraud.
"Too often, regulation at the Exchange is reading toe tags at the morgue," Bill Singer, a securities lawyer and a former regulator, said.
He renewed calls for the SEC to create a quasi-private entity to regulate the NYSE.
The Big Board moved quickly to counter those seeking to take away regulation, saying the charges related to crimes committed before changes were implemented and regulation stepped up.
"Major strides have been taken to enhance the Exchange's regulatory program and investor protection," Richard G. Ketchum, the NYSE's chief regulatory officer, said in a statement.
The NYSE yesterday settled a civil case brought by the SEC that charged the Exchange with turning a blind eye to illegal trading by the specialists over a four-year period.
Under the settlement, under which the NYSE neither admitted nor denied any of the allegations, the Exchange:
* agreed to an outside monitor for the first time in its 213-year history;
* will set aside $20 million to fund a regulatory audit by the SEC every two years for the next six years; and,
* will implement a pilot program for video and audio surveillance on its trading floor for at least 18 months.
The SEC found that over the four-year period, investors at the NYSE were ripped off to the tune of $158 million. Not only did the Exchange fail to adequately police its specialists, but when it did spot wrongdoing, Big Board regulators barely lifted a finger to investigate, the SEC found.
The SEC civil action was much broader than the criminal charges filed in Manhattan federal court.
"The New York Stock Exchange accepts and acknowledges the SEC's criticisms," Ketchum said. "Our board and entire organization are committed to take whatever additional steps are necessary, including carrying out the undertakings contained in the settlement agreement, to meet our surveillance and enforcement obligations."
It didn't stop NYSE critics.
"To see criminal activity on the floor is really astounding,"' Jacob Zamansky, a New York lawyer who represents investors in arbitration against brokers, told Bloomberg.
"This occurred under the watch of the NYSE," he said. "It raises questions about whether the NYSE can properly supervise the people there.'"
"This was not fraud going on at some remote office in Nebraska or in Florida but on the floor literally under the noses of all of the regulators at the exchange," Singer added. |
