Federal prosecutors charged 15 former and current New York Stock Exchange traders with securities fraud, accusing them of costing investors $19 million by putting their firms' interests ahead of the interest of investors.
The US Attorney's office announced the indictments last night at a news conference held jointly with the US Federal Bureau of Investigation and Securities and Exchange Commission.
In a joint action with the NYSE, the SEC also filed civil actions against 20 former NYSE specialists and announced a $20 million settlement with the exchange, charging that it had failed to police specialists.
The criminal charges and civil actions named former and current employees of the five largest of the NYSE's seven specialist trading firms. The specialists put "their own interests and the interests of their firms before the interests of the unwitting investors," David Kelley, the US Attorney for the Southern District of New York, told the news conference.
"Over time, these small thefts accumulate into large profits that translate into higher compensation and bonuses for specialists who execute the trades," he said, adding that the investigation was ongoing.
Exchange specialists, or floor traders, buy and sell issues on the NYSE floor and are supposed to step into the market to dampen volatility and add liquidity. But the exact amount of improper trading continues to be a major sticking point for the floor traders, who have disputed the extent of irregular trades.
"The questionable trades at issue constituted far less than 1 per cent of total trading activity and should be placed in context of a market in which trades overwhelmingly were completed properly," said The Specialist Association in a statement.
If convicted, the defendants could face jail terms of 10 to 20 years and fines of $1 million to $5 million on each of the nine counts of securities fraud, or twice the gross gain or loss resulting from the improper trades, the US Attorney's Office said.