Monthly Disciplinary Actions - May 2009

• An NYSE hearing officer found that from October 2000 to at least September 2005, the firms had deficiencies in their reporting processes and procedures that caused the Firms to inaccurately and/or untimely file numerous required reports with the NYSE, including Forms 121, Forms SS20, NYSE Rule 410B reports, Daily Program Trade Reports (“ DPTR"), NYSE Rule 421 short interest reports and notifications of participation in public offerings pursuant to NYSE Rule 460.30. The Firms’ reporting violations also resulted in inaccurate books and records in violation of Section 17 of the Exchange Act and Rules 17a-3 and 17a-4 thereunder and NYSE Rule 440. Additionally, from October 2000 until August 2004, the Firms failed to provide for appropriate procedures of supervision and control, including a separate system of reasonable follow-up and review to confirm that the above-referenced reports required to be filed with the NYSE were accurately and timely submitted. The Firms’ failure to accurately or timely file these reports affected NYSE Regulation’s ability to conduct certain surveillances that utilized data from these reports and caused the NYSE to publicize certain inaccurate market information.
• Additionally, during the time period January 2005 through March 2006, GS&Co. submitted numerous inaccurate account type indicators to the NYSE’s On-Line Comparison System in violation of NYSE Rule 132.30. The inaccurate account type indicators, among other things, caused the generation of false positive alerts to MKS surveillance of market activity.
• From July 2004 through December 2004, GSEC also filed inaccurate short interest reports with the American Stock Exchange and from October 2000 through December 2006, GSEC filed inaccurate Form 1S reports with Amex, both in violation of Amex Rule 30. Additionally, from October 2000 until August 2004, GSEC failed to provide for appropriate procedures of supervision and control, including a separate system of reasonable follow-up and review to confirm that the above-referenced reports required to be filed with Amex were accurately submitted.   

The NYSE imposed a penalty of a censure and $40,000 fine. Goldman Sachs Execution & Clearing consented to the penalty.

• An NYSE hearing officer found that pursuant to an examination conducted of the respondent by the Amex Sales Practice Examination Department (“SPED”), which detected seven accounts that appeared to permit trading activity that was inconsistent with the parameters established by the Firm’s Written Supervisory Procedures (“WSPs”), the Firm made misstatements to Amex that it took corrective action with respect to the accounts when it failed to do so. Thereafter, the Firm failed to cooperate and timely comply with specific deadlines set by the Amex to provide information with respect to its misstatement. The Firm also failed to implement adequate controls, including a separate system of follow-up and review, to verify that all necessary steps were taken by its then CROP, who was also at the time the Firm’s Compliance Director, to comply with the Amex’s requests in an accurate and timely manner.

NYSE Regulation imposed the penalty of a censure and $15,000 fine. Wedbush consented to the penalty.

• An NYSE hearing officer found that during the period of July 2007 through November 2007, Calyon Securities violated NYSE Rule 123C by improperly entering or canceling 4,102 MOC/LOC orders on six trade dates. The majority of the violations occurred on September 21, 2007, when the Firm improperly entered or canceled a total of 3,793 LOC orders in 202 different securities. It should be noted that September 21, 2007 was an “Expiration Friday.”
• The September 21, 2007 violations resulted from the Firm’s use of an electronic spreadsheet to enter the components of a large index arbitrage program basket.  On September 21, 2007, as the Firm was submitting such a program basket containing numerous LOC orders for transmission to the NYSE just prior to 3:40 p.m., the spreadsheet unexpectedly froze and then “unfroze” just after 3:40 p.m., at which time the orders were routed to the NYSE.  Thereafter, prior to 3:50 p.m., certain LOC orders that did not offset a published imbalance were canceled.
• Furthermore, during the period of July 2007 through August 2008, the Firm violated NYSE Rule 342 by failing to reasonably supervise and implement adequate controls over certain of its business activities, including a separate system of follow-up and review with respect to the entry and cancellation of MOC/LOC orders.

The NYSE imposed a penalty of a censure and $110,000 fine. Calyon consented to the penalty.

• An NYSE hearing officer found that from October 2000 to at least September 2005, GS&Co. had deficiencies in its reporting processes and procedures that caused it to inaccurately and/or untimely file numerous required reports with the NYSE, including Forms 121, Forms SS20, NYSE Rule 410B reports, Daily Program Trade Reports, and NYSE Rule 421 short interest reports. In addition, GS&Co. failed to make timely notifications of its participation in public offerings pursuant to NYSE Rule 460.30. The reporting violations also resulted in inaccurate books and records in violation of Section 17 of the Exchange Act and Rules 17a-3 and 17a-4 thereunder and NYSE Rule 440. Additionally, from October 2000 until August 2004, GS&Co. failed to provide for appropriate procedures of supervision and control, including a separate system of reasonable follow-up and review, to confirm that the above-referenced reports required to be filed with the NYSE were accurately and timely submitted. GS&Co.’s failure to accurately or timely file these reports affected NYSE Regulation’s ability to conduct certain surveillances that utilized data from these reports and caused the NYSE to publicize certain inaccurate market information.
• Additionally, during the time period January 2005 through March 2006, GS&Co. submitted numerous inaccurate account type indicators to the NYSE’s On-Line Comparison System in violation of NYSE Rule 132.30. The inaccurate account type indicators, among other things, caused the generation of false positive alerts to the Division of Market Surveillance’s surveillance of market activity.

• An NYSE hearing officer found that from October 2000 to at least September 2005, GSEC had deficiencies in its reporting processes and procedures that caused it to inaccurately and/or untimely file numerous required reports with the NYSE, including Forms 121, Forms SS20, NYSE Rule 410B reports, Daily Program Trade Reports , and NYSE Rule 421 short interest reports. The reporting violations also resulted in inaccurate books and records in violation of Section 17 of the Exchange Act and Rules 17a-3 and 17a-4 thereunder and NYSE Rule 440. Additionally, from October 2000 until August 2004, GSEC failed to provide for appropriate procedures of supervision and control, including a separate system of reasonable follow-up and review, to confirm that the above-referenced reports required to be filed with the NYSE were accurately and timely submitted. GSEC’s failure to accurately or timely file these reports affected NYSE Regulation’s ability to conduct certain surveillances that utilized data from these reports and caused the NYSE to publicize certain inaccurate market information.
• From July 2004 through December 2004, GSEC also filed inaccurate short interest reports with the American Stock Exchange (“Amex”) and from October 2000 through December 2006, GSEC filed inaccurate Form 1S reports with Amex, both in violation of Amex Rule 30. Additionally, from October 2000 until August 2004, GSEC failed to provide for appropriate procedures of supervision and control, including a separate system of reasonable follow-up and review, to confirm that the above-referenced reports required to be filed with Amex were accurately submitted.   

The NYSE imposed a penalty of a censure and $180,000 fine. In the second case, NYSE Amex imposed a penalty of a censure and $40,000 fine GSEC consented to the penalties.

• An NYSE hearing officer found that from October 2000 to at least September 2005, SLKS had deficiencies in its reporting processes and procedures that caused it to inaccurately file numerous required reports with the NYSE, namely Forms 121. SLKS’ reporting violations also resulted in inaccurate books and records in violation of Section 17 of the Exchange Act and Rules 17a-3 and 17a-4 thereunder and NYSE Rule 440. Additionally, from October 2000 until August 2004, SLKS failed to provide for appropriate procedures of supervision and control, including a separate system of reasonable follow-up and review, to confirm that the above-referenced reports required to be filed with the NYSE were accurately and timely submitted.

• An NYSE hearing officer found that from October 2000 to at least September 2005, SLK Index had deficiencies in its reporting processes and procedures that caused it to inaccurately file numerous required reports with the NYSE, namely Forms 121. SLK Index’s reporting violations also resulted in inaccurate books and records in violation of Section 17 of the Exchange Act and Rules 17a-3 and 17a-4 thereunder and NYSE Rule 440. Additionally, from October 2000 until August 2004, SLK Index failed to provide for appropriate procedures of supervision and control, including a separate system of reasonable follow-up and review, to confirm that the above-referenced reports required to be filed with the NYSE were accurately and timely submitted.

• An NYSE hearing officer found that Pickering improperly permitted his clerks to consummate certain transactions in his specialty securities. In addition, on certain occasions the Respondent, as the specialist responsible for the dealer account, violated his agency obligations as a specialist to match executable customer orders at the best possible price. Instead, on certain occasions, trades were executed for the firm's dealer account that disadvantaged existing public customer orders.

The NYSE imposed a penalty of a censure and one-year Floor bar. Pickering consented to the penalty.

• An NYSE hearing officer found that on one or more occasions from in or about June 2003 to on or about April 25, 2008, Citigroup failed to submit accurate Daily Program Trade Reports ("DPTRs") to the NYSE. Specifically, during this period certain of the Firm’s trading desks and business areas failed to make DPTR submissions related to certain program trading.
• From April 1, 2007 to December 31, 2007 and from July 1, 2008 to December 31, 2008, the Firm (1) filed 92 DPTRs with inaccurate information; (2) made 65 Crossing Session 2 submissions that were inconsistent with the DPTRs it submitted; (3) had four DPTRs that were delinquent; and (4) made three late additions to previously submitted DPTRs.
• Throughout all relevant periods, the Firm failed, in violation of NYSE Rule 342, to reasonably supervise and implement adequate controls reasonably designed to achieve compliance with NYSE rules and policies regarding the submission of DPTRs to the NYSE.

The NYSE imposed a penalty of a censure and $45,000 fine. Citigroup consented to the penalty.

• An NYSE hearing officer found that that during the approximately six-month period between April 27, 2007 and October 29, 2007 (the “relevant period”), Torc Investments & Research, LLC (“Torc” or the “Firm”) failed to submit the required Daily Program Trade Reports ("DPTRs") for certain program trades Torc introduced for execution on the NYSE.
• In addition, throughout the relevant period, Torc failed to reasonably supervise and implement adequate controls, by failing to have relevant written supervisory policies and procedures and a separate system of follow-up and review reasonably designed to achieve compliance with NYSE rules and policies regarding the submission of DPTRs to the NYSE.  

NYSE imposed a penalty of a censure and a $20,000 fine. Torc Investments consented to the penalty.

• An NYSE Hearing Officer found that from March 1, 2005 through January 31, 2007, J. Streicher violated its agency obligations on numerous occasions by failing to give precedence to orders entrusted to it in violation of Amex Rule 155; and from August 1, 2007 through January 31, 2008, participated in numerous destabilizing transactions without obtaining the required floor official approval in violation of Amex Rule 170, Commentary .01 and .02.

The NYSE imposed a penalty of a censure and $25,000 fine. Streicher & Co. consented to the penalty.

• An NYSE Hearing Officer found that from March 8, 2006 through November 11, 2006, Jonathan Frey, violated Amex Rule 170 by inappropriately freezing the NETS display book for a total of approximately 41.5 minutes per trading session, thereby failing to maintain fair and orderly market; violating Exchange Act Rule 11Ac1-4 by failing to adhere to specialist obligation to properly represent agency orders and violating Amex Rule 156 by failing to use due diligence in executing limit orders at their limit price or better.

The NYSE imposed a penalty of a censure and a $25,000 fine. Frey consented to the penalty.

• Between September 2005 and December 2008, Track Data and its Chief Compliance Officer Stern failed to reasonably supervise the Firm’s customer orders, despite having just received regulatory notice that the Firm had failed to reasonably supervise customer orders. Despite such notice, the Firm and Stern failed to enforce the Firm’s written supervisory procedures and to implement adequate systems and controls, including adequate review and follow-up investigation. This resulted in the Firm’s and Stern’s failure to prevent or detect apparent violative wash sales and pre-arranged trades routed through Track Data’s systems to the NYSE Arca Marketplace by two of the Firm’s customers. In addition, Track Data and Stern failed to use due diligence to learn the essential facts of certain customer accounts and customer orders.
• The foregoing conduct constituted violations of NYSE Arca Equities Rules 6.18(a) and (c), 9.2(a) and (b) by the Firm. 

NYSE ARCA imposed a penalty of a censure, a $160,000 fine and an undertaking to conduct a review of the Firm’s supervisory structure and practices. Track Data Securities Corp consented to the penalty. (See 09-ARCA-04 for Stanley Stern decision.)

• Between September 2005 and December 2008, Track Data and its Chief Compliance Officer Stern failed to reasonably supervise the Firm’s customer orders, despite having just received regulatory notice that the Firm had failed to reasonably supervise customer orders. Despite such notice, the Firm and Stern failed to enforce the Firm’s written supervisory procedures and to implement adequate systems and controls, including adequate review and follow-up investigation. This resulted in the Firm’s and Stern’s failure to prevent or detect apparent violative wash sales and pre-arranged trades routed through Track Data’s systems to the NYSE Arca Marketplace by two of the Firm’s customers. In addition, Track Data and Stern failed to use due diligence to learn the essential facts of certain customer accounts and customer orders.
• The foregoing conduct constituted violations of  NYSE Arca Equities Rules 6.18(a) and (c) and 9.2(a) by Stern. 

NYSE ARCA imposed a penalty of a censure and av $15,000 fine. Stern consented to the penalty. (See 09-ARCA-03 for Track Data Securities Corp. decision.)