.jpg)
NYSE Regulation, Inc. announced today disciplinary action against former President and Chief Supervisory Specialist of Fleet Specialist, Inc. Myles D. Gillespie for failure to reasonably supervise certain specialists who committed interpositioning and trading ahead violations from September 2000 through June 2003.
Disciplinary action has also been taken against Thomas J. Verdiglione, a former specialist with Van der Moolen Specialists USA , LLC, who, on certain occasions from May 2000 through June 2003, interpositioned his firm’s dealer account between matchable public orders or traded ahead of customer orders, thereby disadvantaging those orders.
“The honesty and integrity of the trading floor is of utmost importance both to the market and to investors,” said Susan Light, senior vice president of Enforcement, NYSE Regulation. “NYSE Regulation has vigorously pursued disciplinary actions against specialists and clerks, as well as their supervisors, who abused the public trust and disadvantaged customer orders. Supervisors who have been notified of misconduct must thoroughly review each situation and take appropriate action.”
Gillespie, of Rye, N.Y., the former president and chief supervisory specialist of Fleet Specialist, (“Fleet”), now known as Banc of America Specialist, was accountable for Fleet operations on the Floor, had the ultimate responsibility to oversee all firm employees, including specialists and their trading assistants, and the obligation to ensure trading misconduct in violation of NYSE Rules did not occur.
Gillespie received notice on various occasions that several specialists at Fleet, including former specialist David Finnerty, violated their fundamental agency obligations as specialists to hold the interest of public customer orders above the proprietary interests of Fleet and to match executable customer orders at the best price.
Instead of pairing buy and sell orders on the NYSE’s Super DOT System, certain specialists interpositioned the firm’s dealer account between those orders, or traded ahead of those orders, thereby disadvantaging public customers.
After receiving notice of violative conduct by certain Fleet specialists, it was incumbent upon Gillespie, as president and chief supervisory specialist of Fleet, to take action reasonably designed to determine the scope of the violative conduct and take steps to remedy and prevent the misconduct. Gillespie failed to do so and the misconduct continued through June 2003.
The violative trading committed by specialists at Fleet resulted in the total payment of $59,097,469 by Fleet and the criminal conviction of Finnerty for securities fraud in the Southern District of New York. See Fleet Specialist, Inc., Decision 04-49 (NYSE Hearing Board, March 29, 2004 ). Finnerty has filed a pending motion in the United States District Court, Southern District, to set aside the verdict.
NYSE Regulation censured, issued a fine of $125,000, and barred Gillespie for three years from NYSE membership, allied membership, approved person status, and employment or association in any capacity with any NYSE member or member organization. He is also permanently barred from functioning in any capacity as a specialist or from supervising any specialists. Furthermore, he is barred from employment in any capacity on the Floor of the NYSE.
NYSE Regulation also censured and permanently barred Thomas J. Verdiglione, of Englishtown , N.J. , a specialist with Van der Moolen Specialists USA , LLC, from employment in any capacity on the Floor of the NYSE and from functioning in any capacity as a specialist or supervisor thereof.
Click on the following links to read each Hearing Board Decision: Myles D. Gillespie, Decision 07-003 (NYSE Hearing Board, January 10, 2007) and Thomas J. Verdiglione, Decision 07-004 (NYSE Hearing Board January 10, 2007) .
In settling these charges brought by NYSE Regulation, Gillespie and Verdiglione neither admitted nor denied the allegations.
In addition to these Hearing Board Decisions, NYSE Regulation in December 2006 charged and is pursuing disciplinary actions against four former specialists for interpositioning and trading ahead misconduct, three former clerks and one present clerk for aiding and abetting these violations, and one former clerk who is presently a specialist for interpositioning, trading ahead, and aiding and abetting.
These violations occurred prior to the launch of Hybrid MarketSM trading system enhancements that significantly limit the possibility of similar violations from occurring due to automatic execution and safeguards embedded into the Display Book.
About NYSE Regulation
NYSE Regulation, Inc., is a not-for-profit corporation dedicated to strengthening market integrity and investor protection. It protects investors by regulating the activities of member organizations through the enforcement of marketplace rules and federal securities laws.
NYSE member organizations hold 98 million customer accounts or 84 percent of the total public customer accounts handled by broker-dealers. Total assets of NYSE member organizations are over $4 trillion. They operate from 20,000 branch offices around the world and employ 195,000 registered personnel. NYSE Regulation, Inc. also ensures that companies listed on the NYSE and on NYSE Arca meet their financial and corporate governance listing standards.
NYSE Regulation 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. For more information, visit our Web site at www.nyseregulation.com.
