NYSE Settles With SEC Over Floor Brokers
The New York Stock Exchange said it has agreed to beef up surveillance of its floor brokers to settle allegations by the Securities and Exchange Commission that it failed to halt illegal trading schemes. Without admitting or denying the agency’s findings, the world’s largest stock exchange said it will design an electronic audit system that will allow suspicious trades to be reconstructed. The SEC said it found that between 1993 and 1998, the NYSE failed to detect and halt schemes in which at least 64 floor brokers initiated trades in exchange for a share of trading profits and losses. Federal securities law and related NYSE rules prohibit floor brokers from trading for their benefit, because they often get important trading information ahead of others. The SEC said that in one case, floor brokers received $11.1 million in unlawful profit by passing trades through a non-NYSE member broker-dealer, Oakford Corp. The SEC said nine of these floor brokers have pleaded guilty to criminal charges and three have settled civil charges.