US pension fund giant sues NYSE in $1bn fraud claim
Wednesday 07 June 2006
The New York Stock Exchange is facing a legal claim that it helped traders defraud investors of more than $1bn (£540m).
A group of fund managers, led by California's giant state pension fund, Calpers, has launched an attempt to hold the NYSE to account for abuses by the traders - known as "specialists" - over a five-year period to 2003.
Until the financial watchdog, the Securities and Exchange Commission (SEC), cracked down, specialists regularly traded for their own profit before they fulfilled buy or sell orders from clients. Calpers claims the NYSE not only knew the trading floor was riddled with such abuses but even encouraged them - and it is demanding damages of hundreds of millions of dollars from the exchange.
The claim comes at a sensitive time for the NYSE, which is planning a cash-and-share deal to merge with the pan-European stock market, Euronext, and is hoping to splash out on further acquisitions.
Last year, the NYSE was censured by the SEC for "failing to enforce compliance with the federal securities laws and NYSE rules which prohibit specialists from 'interpositioning' and 'trading ahead' of customer orders".
In 2004, the SEC fined the seven specialist firms more than $245m. Since then, their profitability has collapsed.
Calpers is a $200bn pension fund and one of the largest single investors in the US. It launched a class action against the seven firms and the NYSE in December 2003, but the NYSE was dismissed from the suit last year. A judge ruled the exchange was immune from being sued over its regulatory decisions. But Calpers' lawyers have filed an appeal. In court papers, they argue: "NYSE officials falsely assured investors that they were operating a fair and orderly market. This simply was not true."
In the past few days, they have also received documents and electronic records from the specialist firms and are beginning to sift through data on millions of trades that might have violated stock exchange rules.
The NYSE said that it does not comment on ongoing litigation.
- 1 Disney heiress Abigail disowns her share of family profits in West Bank company
- 2 The secret report that helps Israel hide facts
- 3 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 4 Ebola virus: UK health officials issue warning to doctors as experts admit the outbreak 'is not under control'
- 5 Ross Burden dead: MasterChef and Ready Steady Cook star dies at age 45 after suffering from cancer
'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
Richard Dawkins says 'date rape is bad, stranger rape is worse' on Twitter
Ross Burden dead: MasterChef and Ready Steady Cook star dies at age 45 after suffering from cancer
Zayn Malik on Israel-Gaza: One Direction singer bombarded with Twitter death threats after posting #FreePalestine
MH17 crash: Black boxes show plane suffered 'massive explosive decompression' following shrapnel hit
The secret report that helps Israel hide facts
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
- < Previous
- Next >
iJobs Money & Business
£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...
£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...
£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...
£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...