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SEC Fines New York Stock Exchange $14 Million for Regulatory Failures

Posted  March 7, 2018

By the C|C Whistleblower Lawyer Team

In a landmark settlement, the Securities and Exchange Commission (SEC) announced yesterday that it has charged New York Stock Exchange LLC (NYSE) and two affiliated exchanges in connection with five separate investigations into several regulatory failings, including the first ever charge based on a violation on Regulation Systems Compliance and Integrity (Reg SCI) requirements. 

The SEC’s order details a number of violations by NYSE and its affiliated exchanges NYSE American LLC and NYSE Arca, Inc.  These violations included negligently representing that quotations were automated when they were not, erroneously suspending trading, failing to publish required information, and failure to comply with Reg SCI’s business continuity and disaster recovery obligations.

Rules 1001(a)(1) and 1001(a)(2)(v) of Reg SCI collectively require national exchanges like NYSE to maintain “policies and procedures” that cover at least seven topics, including “[b]usiness continuity and disaster recovery plans that include maintaining backup and recovery capabilities sufficiently resilient and geographically diverse and that are reasonably designed to achieve next business day resumption of trading and two-hour resumption of critical SCI systems following a wide-scale disruption.”  The SEC found that the NYSE and NYSE American exchanges did not meet this requirement for over a year after the Rules became effective.

“Exchanges play an important role in protecting investors,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement.  “For retail investors to have confidence in our markets, exchanges must provide accurate information and comply with legal requirements, including being equipped for unexpected market disruptions.”

“Two NYSE exchanges previously settled rule-filing violations in 2014, and now we’ve found further problems,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement.  “NYSE’s violation of the prior SEC order was a significant factor in assessing the civil penalties in this matter.”

Tagged in: Regulatory Violations, Securities Fraud,

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