SEC Probing Nasdaq

by Glen Shapiro, LawAndTax-News.com, New York

15 February 2005

The US Securities and Exchange Commission (SEC) last week announced that it has launched an investigation into the Nasdaq stock market, as overseen by its parent, the National Association of Securities Dealers (NASD), in connection with an inspection of wash trades and net capital violations undertaken by MarketXT, an NASD member firm.

The Report of Investigation issued by the SEC found, among other violations, that Nasdaq employees had observed suspicious trading by MarketXT, but had not communicated their observations to NASD Regulation, Inc.

Speaking with regard to the lapse, Mark Schonfeld, Director of the SEC's Northeast Regional Office, stated that:

“Self-Regulatory Organizations are a critical line of defense for investors. Even if an SRO’s market and regulatory functions are delegated to separate entities, the SRO must ensure that each entity fulfills its regulatory responsibilities.”

NASD and Nasdaq consented to the issuance of the report, but neither admitted nor denied the findings or conclusions therein.

MarketXT was charged with securities fraud in a separate administrative proceeding, the SEC additionally revealed.

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