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Boston Stock Exchange and James Crofwell

Washington, DC: (Sep-05-07) The US Securities and Exchange Commission brought charges against the Boston Stock Exchange and James B. Crofwell, its former president, alleging that they failed to enforce rules designed to protect investors. The federal regulator claimed that from at least 1999 through 2004, the stock exchange and Crofwell did not enforce such rules intended to prevent broker-dealer specialist firms from trading securities ahead of their customers' orders. The SEC said hundreds of violations went undetected even after regulators repeatedly warned the exchange it needed to improve its surveillance systems. The SEC also said Crofwell, who was president from 1999 to 2003, knew the exchange's procedures were inadequate at the time, but failed to correct it.

Though neither the Boston Stock Exchange nor Crofwell admitted or denied the findings of the SEC's complaint, both agreed to a censure and an order to cease and desist from future violations. In a settlement reached, the exchange also agreed to spend at least $1 million to retain a third-party consultant to conduct comprehensive audits of its surveillance, examination, investigation and disciplinary programs related to trading. Crofwell agreed to pay a $75,000 civil penalty for aiding and abetting the exchange's violations in a related civil action filed in the US District Court for the District of Massachusetts. [FORBES: INVESTOR FRAUD]

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Published on Sep-6-07


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