The U.S. Securities and Exchange Commission and the New York Stock Exchange today announced a settlement of with two NYSE specialist firms, SIG Specialists Inc. and Performance Specialist Group LLC, accused of front running

The firms will pay a total of US$5.2 million in penalties and disgorgement, consisting of US$1.7 million in civil money penalties and US$3.5 million in disgorgement, and implement steps to improve their compliance procedures and systems.

In a joint investigation, the NYSE and SEC found that, between 1999 and 2003, the two firms violated federal securities laws and NYSE rules by front running –executing orders for their dealer accounts ahead of executable agency orders. Through these transactions, the firms violated their basic obligation to match executable public customer buy and sell orders and not to fill customer orders through trades from the firm’s own account when those customer orders could be matched with other customer orders.

In the settlements, the firms have neither admitted nor denied the findings.

The settlement provides that the firms’ US$5.2 million payment will go to a Distribution Fund for the benefit of injured customers. This includes the US$1.7 million in civil money penalties, which, under the Sarbanes-Oxley Act, may be distributed to victims in SEC enforcement actions.

The investigation is continuing, regulators report. Earlier in the year, on March 30, the SEC and the NYSE announced settlements with five other NYSE specialist firms accused of front running. Those five firms had agreed to pay more than $241 million in penalties and disgorgement.