NASD Regulation Directs Knight Securities to Pay $1.5 Million for Market Violations
Washington, D.C.—NASD Regulation, Inc., announced today that Knight Securities L.P., has been censured, fined $700,000 and directed to pay $800,000 to clients of the firm. The sanctions were imposed for wide-ranging market making and trading violations, including failure to honor posted quotes and to accurately report trades to the NASD. The fine and payments made by Knight are the largest ever imposed by NASD Regulation for these types of marketplace violations.
NASD Regulation found that Knight committed numerous violations of federal securities laws and NASD rules spanning the 4-year period from July 1997 to May 2001, a period of rapid expansion for the firm. Among the most significant was a series of violations of the locked and crossed markets rule that emerged during separate review periods from 1998 to 2001. The locked and crossed violations occurred during normal trading hours, before the market opened, and in trading following Initial Public Offerings (IPOs). NASD Regulation also found that Knight failed to honor posted quotes, promptly display limit orders and to report thousands of trades timely and accurately to the NASD.
Finally, in connection with trading in the market for OnSale, Inc., NASD Regulation found that the execution quality provided by Knight for 645 orders was inconsistent with just and equitable principles of trade. Knight was directed to pay $800,000 plus interest to clients of the firm in connection with the execution of OnSale orders.
"It is critical that no matter how rapid a firm's business growth, the commitment to develop and maintain systems to ensure compliance must keep pace," said Mary L. Schapiro, President of NASD Regulation, Inc. "This is fundamental to the success of our markets and the protection of investors."
As a part of the settlement with NASD Regulation, Knight neither admitted nor denied the findings.
Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999 or by sending an e-mail through NASD Regulation's Web Site at www.nasdr.com.
The National Association of Securities Dealers, Inc. is the largest securities industry, self-regulatory organization in the United States. It is the parent organization of NASD Regulation, Inc.; the American Stock Exchange, LLC; and NASD Dispute Resolution, Inc. For more information about the NASD and its subsidiaries, please visit the following Web sites: www.nasd.com; www.nasdr.com; www.amex.com; www.nasdadr.com.