The Commission's investigation will seek to determine whether there have been violations of the federal securities laws or NYSE rules. This inquiry should not be construed as an indication by the Commission or its staff that any violation of law has occurred. The Commission will coordinate its investigation with the New York Attorney General, who will seek to determine whether there have been violations of New York laws governing New York nonprofit corporations.
The Commission's investigation is the most recent step in its ongoing efforts, which began almost 12 months ago, to address governance issues at the NYSE. In March of last year, Chairman Donaldson wrote to former Chairman Grasso, as well as the heads of each of the other SROs, asking them to undertake an exhaustive review of their SRO's governance practices. The NYSE responded on June 5, 2003 to the SEC's request with an initial governance report and interim structural changes, but indicated that a more thorough review was to be conducted under the direction of a Special Governance Committee.
While the NYSE's review was still underway, the Commission learned of the NYSE's extension of former Chairman Grasso's employment agreement, as well as its substantial payout of his deferred compensation and benefits. In response, on September 2, Chairman Donaldson wrote to the head of the NYSE's Compensation Committee and Special Governance Committee noting that the approval of Mr. Grasso's pay package raised serious questions regarding the effectiveness of the NYSE's current governance structure and asking the NYSE to provide detailed information regarding the then-Chairman's compensation arrangement and how it was approved by the NYSE Board.
Under interim-Chairman Reed's leadership, on Nov. 7, 2003, the NYSE filed a proposal with the Commission to amend and restate its Constitution to implement a series of important governance changes. On December 17, the Commission approved those changes.
