SEC, U.S. Attorney's Office Charge NYSE Specialists
April 18, 2005
The Securities and Exchange Commission has instituted administrative and cease-and-desist proceedings against 20 former New York Stock Exchange specialists on charges of securities fraud and other improper trading practices.
According to regulators, between 1999 and mid-2003, the traders pervasively executed proprietary orders for their firms ahead of the orders of public customers or agencies placed through the NYSE's electronic system. The SEC has come to a $20 million settlement with the Big Board for its oversight in policing the alleged wrongdoing.
"These individuals violated the public trust by abusing the privileged position they had as specialists on the New York Stock Exchange," said Stephen M. Cutler, director of the Commission's Division of Enforcement, in a statement. "We have zero tolerance for specialists who trade for their firm's proprietary accounts when they should be trading for the accounts of their customers."
In related news, federal prosecutors have filed charges against 15 of the former specialists, accusing them of putting their firm's interests ahead of the general public and costing those investors $19 million.
"Over time, these small thefts accumulate into large profits that translate into higher compensation and bonuses for specialists who execute the trades," said David Kelley, a U.S. attorney for the Southern District of New York. The joint investigation is ongoing, officials said.