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4 brokers, including Goldman Sachs, fined for breaking short-sales rule
Monday, July 24, 2006
NEW YORK -- NYSE Group Inc. said on Monday it fined four firms a total of $1.25 million, saying they violated a U.S. Securities and Exchange Commission rule on short selling.
It censured and fined Daiwa Securities America Inc., a subsidiary of Japan-based brokerage Daiwa Securities Group Inc., Goldman Sachs Execution & Clearing, part of Goldman Sachs Group Inc., Citigroup Global Markets, Inc., a subsidiary of Citigroup Inc., and Credit Suisse Securities, part of Credit Suisse Group.
The scale of the violations resulted in fines ranging from $250,000 to $400,000, NYSE said.
Short sellers borrow shares they view as overvalued from a brokerage, then sell them and wait for the market price to decline. If it does, then the short seller buys the shares back, returns them to the brokerage and pockets a profit on the difference between the sale and the repurchase prices.
NYSE said the operational deficiencies concerned Regulation SHO, a securities rule meant to protect the market and investors from short sale abuses.
The SEC's Regulation SHO became effective in January 2005.
All four companies consented to the penalty without admitting or denying the allegations, NYSE said in a statement.