NYSE Regulation announced that it has disciplined five firms for a variety of rule violations.

J.P. Morgan Securities Inc. was disciplined for violation of SEC rules on short sales, NYSE order rules and supervisory violations. It consented without admitting or denying guilt to findings of operational deficiencies concerning Regulation SHO, violating NYSE order rules, and books and records and supervisory violations.

An NYSE hearing officer found that from 2001 to 2005 the firm failed to comply with NYSE Rules and, for part of this period, the requirements of Regulation SHO as a result of numerous deficiencies in the firm’s technological, operational, compliance and supervisory systems and procedures.

The officer noted that the firm had provided substantial and meaningful cooperation with the Division of Enforcement’s investigation and self-reported nearly all of the initial violations. In addition, the firm hired an outside consulting firm to conduct an audit of the trade reporting systems and procedures used by the firm’s equity desks, which audit revealed additional violations. The firm has also made significant changes to its systems and procedures, including the creation of a new compliance technology department.

The NYSE imposed the penalty of a censure and a US$400,000 fine. J.P. Morgan consented to the penalty.

Also, Citigroup Global Markets Inc. consented without admitting or denying guilt to findings of supervisory and control and books and records violations in connection with proprietary trading of precious metals, and related futures, forwards and futures options.

An NYSE hearing officer found that from January 2002 through January 2003 the firm’s sole precious metals trader, engaged in proprietary trading in physical precious metals, precious metals futures, forwards and futures options in excess of her authorized limits. This trading resulted in unrealized losses for the firm. It found that she concealed her unauthorized trading and losses from the firm by concealing some of her forward positions, mismarking the value of her precious metals positions, and causing the net exposure resulting from her futures options positions to be miscalculated.

The NYSE imposed the penalty of a censure and a US$500,000 fine. Citigroup Global Markets, Inc. consented to the penalty.

In the other cases, Wachovia Capital Markets LLC, Wachovia Securities LLC and First Clearing LLC consented without admitting or denying guilt to findings of books and records and supervisory and control violations in connection with the retention and/or review of electronic communications.

The NYSE imposed a penalty of a censure, a US$2,250,000 fine (imposed jointly on the three related entities) and an undertaking to take all necessary and appropriate steps to bring the firms’ policies, procedures and practices into compliance with NYSE Rules and the federal securities laws, and to prevent recurrence of these violations. Collection of US$1,650,000 of the fine will be waived in recognition of the payment by the firm of that amount pursuant to a regulatory settlement concluded under the auspices of NASAA relating to e-mail communications.