An NYSE hearing panel found that from approximately August 2000 through December 2001, Furino participated in a fraudulent scheme with an individual associated with a nonmember broker-dealer (the "Day Trader"). Through this scheme, Furino, in exchange for cash payments from the Day Trader, communicated confidential information concerning his Firm's customers’ orders to the Day Trader who used the information to trade ahead of and/or along with those customer orders.
During the relevant period, Furino regularly provided the Day Trader information about large orders that customers had transmitted to the Firm for execution, but that the Firm had not yet executed. After receiving the information from Furino, the Day Trader would typically enter an order through the Firm on the same side of the market and in the same security in expectation of a favorable movement in the stock price as a result of the subsequent execution of the large customer order. The Day Trader received executions on the orders he entered through the Firm ahead of the large customer orders, without the customer’s consent, and often at more favorable prices than those subsequently received by the large customer orders. After, or while, the Firm’s Floor brokers executed the large customer order, the Day Trader then entered an order through the Firm, on occasion with Furino’s aid, on the opposite side of the market in the same security to either sell the long position he established, or cover his short position.
The hearing panel further found that the Day Trader engaged in this pattern of trading activity with the aid of Furino on at least 58 different occasions during the relevant period. In many instances, the Day Trader succeeded in profiting from the short-term change in prices caused by the subsequent execution of the large customer order, often to the detriment of the large customer order. In exchange for access to the Firm’s order flow information, the Day Trader made cash payments to Furino that were not disclosed to the Firm.
This matter was the result of a joint investigation with the United States Attorney's Office for the Eastern District of New York and the Securities and Exchange Commission's Northeast Regional Office. On or about September 12, 2005, Furino pleaded guilty to criminal charges of conspiracy to commit securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, among other things.
About NYSE Regulation
On December 17, 2003, the SEC approved a new governance structure for the NYSE. Under the new design, the NYSE Board of Directors is comprised solely of independent directors, except for the chief executive officer, who have no affiliation with any regulated member firm. A new position of chief regulatory officer was created and reports directly to the board of directors through a new Regulatory Oversight Committee. As a result, NYSE Regulation is insulated from potential influence from NYSE members and member firms, operates separately from the business side and is independent in its decision-making.
NYSE Regulation plays a critical role in monitoring and regulating the activities of its members, member firms and listed companies, as well as enforcing compliance with NYSE rules and federal securities laws. Nearly 400 of the largest securities firms in America are members of the New York Stock Exchange. These firms service 98 million customer accounts, or 84 percent of the total public customer accounts handled by broker-dealers, with total assets of over $4 trillion. They operate from 20,000 branch offices around the world and employ 144,000 registered personnel. Nearly 700 employees, or more than 40 percent of the Exchange’s staff, work for NYSE Regulation, which consists of four divisions: Market Surveillance, Member Firm Regulation, Enforcement and Listed Company Compliance, as well as a Risk Assessment Unit and Dispute Resolution/Arbitration.
