Matthew Goldstein
Goldman Sachs(GS Quote - Cramer on GS - Stock Picks) is paying a $450,000 fine to settle allegations that its Spear, Leeds & Kellogg unit failed to properly supervise its employees.
The fine stems from an October 1999 incident in which several Spear, Leeds floor brokers allegedly aided and abetted a customer in "marking the close" on the New York Stock Exchange. The Securities and Exchange Commission said the alleged activity involved an attempt to manipulate stock prices by "executing purchase or sale orders at or near the close of the market." As is customary, neither Goldman nor Spear, Leeds admitted or denied the allegations in settling the investigation. The allegations involve activities that took place before Goldman purchased Spear, Leeds in September 2000 for $6 billion. Spear, Leeds is one of the main specialist firms on the NYSE. Floor brokers receive orders to buy and sell stocks and convey them to a designated trading pit on an exchange floor, where they transact with a specialist. Spear, Leads runs both a floor-broker and specialist operation; the allegations in the settled case involved only the floor-broker unit. The allegations against Spear, Leeds stem from an attempt by Baron Capital, a fund run by Ron Baron, to manipulate the closing price in shares of Southern Union(SUG Quote - Cramer on SUG - Stock Picks), a utilities company. In April, Baron and his fund agreed to pay a $2.7 million fine to the SEC to settle similar stock manipulation allegations. The fine against Spear, Leeds is the second big penalty imposed on the firm this year. Earlier, the American Stock Exchange fined Spear, Leeds $285,000 over a series of trading violations that occurred in 1999 and 2002.
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