NEW YORK, July 30 (Reuters) - The New York Stock Exchange on Wednesday said it fined one of its largest specialist firms for improperly trading shares of General Motors Corp. during a volatile session last year.
The NYSE fined Fleet Specialist, a unit of FleetBoston Financial Corp. , and Michael Bonnano, one of its specialists, for how it managed the trading of GM shares on June 27, 2002, a bumpy session marked by rumors -- later denied by the company -- that the automaker was subject of an accounting investigation.
Specialists stand on the exchange floor and manage the buying and selling of shares, and are required to step in with their own capital and even out supply and demand.
The exchange said Bonnano failed to maintain a fair and orderly market in GM shares by, among other things, not buying enough shares while the price was falling.
For instance, the exchange said that for a roughly three-minute period, GM's stock declined 80 cents on volume of 146,700 shares, but Bonnano did not purchase any shares. Rather, he sold 10,000 shares.
The exchange also said Bonnano did not comply with his negative obligation -- the obligation to stand out of the way if a buyer and seller are available to trade without undue dealer intervention.
The NYSE is currently probing a number of its specialists, including Fleet, for possible violations of that obligation, but the exchange said these findings were not related to the ongoing probe.
The NYSE also found that from July 2001 to September 2002, Fleet Specialist failed to immediately publish a customer limit order that would have improved the bid or offer being shown. Instead, the NYSE said Fleet relied too heavily on an automated system of "last resort" that would publish the quote within 28 seconds of receiving the order.
While the Bonnano disciplinary action stemmed from trading during roughly 13 minutes of a volatile day, Edward Kwalwasser, NYSE's group executive vice president for regulation, said: "We hold our specialists to a very high standard."
The NYSE censured and fined Fleet $150,000, and censured and fined Bonnano $25,000. The two consented to the penalties without admitting or denying guilt.
Fleet spokesman Charles Salmans said Bonnano still works at the firm, but has been moved to trading another stock.
"We have reviewed the exchange's action with our staff and underscored the commitment to ensuring orderly markets in our listed stocks during volatile market environments," Salmans said. He said Bonnano was not available to comment
A spokeswoman for GM said the "corrective action that the firm (Fleet) has taken in relation to those problems has been sufficient."
FAHNESTOCK
The NYSE fined Fahnestock & Co. Inc., a subsidiary of Canada's Fahnestock Viner Holdings Inc. , for deficiencies in its mutual fund clearance and regulatory reporting activities during 1997 and 1998.
The NYSE said the firm, among other things, did not adequately complete reconciliations of its mutual fund positions or resolve reconciliation differences in a timely manner.
The issues arose in connection with Fahnestock's acquisition of First of Michigan Corp. in July 1997, the company said.
"The matters at issue involved highly technical reporting requirements," said E.K. Roberts, treasurer of Fahnestock & Co. Inc., commenting for firm and Lowenthal. "These matters were satisfactorily resolved many years ago."
The NYSE censured and fined Fahnestock $500,000; censured Albert Lowenthal, chairman and CEO of the firm; and required it to hire a consultant to review its systems. Fahnestock and Lowenthal consented without admitting or denying guilt.
UBS PAINEWEBBER
UBS PaineWebber Inc., which has since dropped the PaineWebber part of its name, consented without admitting or denying guilt that it made unsuitable recommendations and sales of callable CDs between June 1996 and February 2000, and lacked a reasonable system of supervision for sale of the CDs.
The NYSE imposed a censure and $175,000 fine.
"We are pleased that this matter is resolved," a UBS spokeswoman said. (Additional reporting by Chris Sanders)