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SEC Slaps NYSE, Other Exchanges With $14M Fine Over Reg Failures

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The Securities and Exchange Commission says it charged the New York Stock Exchange and two affiliated exchanges with “regulatory failures tied to several disruptive market events.”

NYSE, NYSE Arca and NYSE American agreed to pay a $14 million fine connected with the charges, which include the first violations of the Regulation Systems Compliance and Integrity rules (or Reg SCI) — adopted by the SEC in 2014.

According to the SEC, two NYSE exchanges were charged with violating Reg SCI’s business continuity and disaster recovery requirement. For instance, the exchanges wrongly staged a marketwide regulatory halt, negligently misrepresented stock prices as ”automated” and applied price collars during unusual volatility on Aug. 24, 2015, the agency says.

”Exchanges play an important role in protecting investors,” explained Stephanie Avakian, co-director of the SEC’s Enforcement Division, in a statement. ”For retail investors to have confidence in our markets, exchanges must provide accurate information and comply with legal requirements, including being equipped for unexpected market disruptions.”

In addition, the agency found that the NYSE exchanges violated Regulation National Market System (or NMS), passed in 2005 to improve the fairness in price execution.

”Two NYSE exchanges previously settled rule-filing violations in 2014, and now we’ve found further problems,” said Steven Peikin, co-director of the SEC’s enforcement division, in a statement. ”NYSE’s violation of the prior SEC order was at significant factor in assessing the civil penalties in this matter.”

In agreeing to the fine, the three exchanges did not admit or deny the findings.

“We believe this settlement is in the best interest of the NYSE Exchanges,” an NYSE spokesperson said in a statement. “We take our regulatory obligations seriously and remain focused on building and maintaining industry-leading technology and ensuring that our markets operate with the utmost integrity,”