NYSE fines firms for operational failures

NEW YORK – NYSE Regulation, the regulatory arm of the New York Stock Exchange, has fined member firms for operational failures and supervisory violations. It fined 18 member firms and two former member firms a total of $5.85 million for failing to submit accurate electronic blue sheets containing trading information requested by the NYSE and other regulators.

Additionally, the firms are charged with failing to establish and maintain appropriate systems and procedures for the supervision and control of the reporting requirement. The member firms agreed to validate their trade reporting processes and confirm the validations to the NYSE.

"Blue sheets are an essential component of NYSE investigations into insider trading, market manipulation and other potential violations. Firms must get their operations in order, then periodically test their internal systems to be sure this vital information is accurate," said Susan Merrill, chief of enforcement, NYSE Regulation.

The fined firms include Merrill Lynch, Pierce, Fenner & Smith, of New York; UBS Securities LLC of Charlotte, North Carolina; and Wachovia Capital Markets LLC also of Charlotte, North Carolina.

Blue sheets are documents that are generated by firms at the request of regulators in connection with investigations of questionable trading. The blue sheets provide information such as the identity of an account holder for whom specific trades were executed and whether a transaction was a buy or a sell and long or short.

Since 1989, firms have submitted blue sheets in an electronic format to all regulators including the NYSE. Inaccuracies and systemic problems were first detected at the Firms by the Market Surveillance division of NYSE Regulation and then referred to the Division of Enforcement for prosecution.