Regulators, Specialists Reach Tentative Agreement

The New York Stock Exchange's five largest "specialist" firms reached a preliminary agreement Tuesday to pay about $240 million to settle a civil case claiming they failed to oversee traders who improperly traded ahead of their customers, The Wall Street Journal reported.

The Journal reported that the deal could still unravel at the 11th hour, but if it stands, it would represent the biggest fine involving Big Board specialists ever. The specialists, or auctioneers who supervise the buying and selling of shares on the Big Board floor, reached the tentative accord with the Securities and Exchange Commission (SEC) and the NYSE’s enforcement arm.

As part of the preliminary agreement, the specialists would pay a total of about $155 million in disgorgement of ill-gotten gains plus penalties of about $85 million, according to a person familiar with the matter.

The firms, which all deny wrongdoing, are: Bear Stearns Cos.' Bear Wagner Specialists; Goldman Sachs Group Inc.’s Spear, Leeds & Kellogg; LaBranche & Co.; Van Der Moolen Holding NV's Van Der Moolen Specialists USA; and FleetBoston Financial Corp.’s Fleet Specialist unit.

The dispute has eroded public trust in the Big Board’s open-outcry system, which has been used for 211 years. The SEC issued a confidential report in October that criticized the NYSE for failing to police its specialists and for overlooking obvious violations that resulted in investors being shortchanged by at least $155 million over three years.


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