Updated from March 22
The Securities and Exchange Commission sued former American Stock Exchange CEO Salvatore Sodano, alleging he failed to enforce legal compliance at the exchange.
The SEC sued Sodano, who ran the Amex for five years through 2004, along with several other former top execs.
The SEC settled with the exchange itself, issuing a cease-and-desist order over an alleged failure to "surveil for violations of order handling rules by Amex members." The agency claims the Amex also "failed to keep and furnish surveillance and other records."
"This is about prior history and prior management and doest not relate to current management," says Marty Kaminsky, attorney at law firm Pollack & Kaminsky in New York, who represented the SEC. "The Amex has not admitted or denied any wrongdoing."
Even so, the case is another black eye for the exchange. In 2000, the Amex and SEC reached a consent decree covering similar issues.
Sodano allegedly "failed to make regulation an Amex priority, to pay adequate attention to regulation, to put in place an oversight structure to monitor compliance, to ensure that regulatory staff was properly trained and to dedicate sufficient resources to regulation," the SEC said.
"SROs play a key role in protecting investors, says Scott Friestad, associate director at the SEC's division of enforcement in Washington, referring to so-called self-regulatory organizations like the Amex. "They have responsibilities for enforcing their own rules and federal securities law and our allegation against Mr. Sodano is that he turned a blind eye to numerous deficiencies."
Sodano is now the dean of Hofstra University's Frank G. Zarb School of Business. In a statement issued by his attorney, Sodano said he intends to "vigorously fight the action taken against him."
"Dean Sodano informed the University of the SEC administrative matterprior to his appointment, but he did not expect that any action would betaken," Hofstra said. "Dean Sodano will vigorously contest this administrative actionand expects to be completely vindicated. He has an umblemished recordand outstanding reputation and we are supportive of his efforts todefend himself. Dean Sodano has assured the University that the casewill not distract from his important responsibilities as dean of thebusiness school."
Sodano, who is contesting the case, could be censured, though his lawyer says Sodano had no knowledge of the violations. He notes that a censure is the lightest possible SEC sanction in an enforcement action.
"As a practical matter if
Sodano were censured that would create a taint on his record that could make it very difficult to qualify for a seat on a corporate board, especially a regulated one," comments Kaminsky.
A settlement should help Amex's efforts to eventually become a public company. It announced in January that it was hiring
to begin the process of demutualization.
As part of the cease-and-desist order, the Amex must enhance its trading systems and training programs to members and its regulatory staff and undergo audits every two years to ensure that the changes have been made. No monetary fine was placed on the Amex.
"The SEC settlement represents an important step in moving forward and putting our past regulatory issues behind us," said Neal Wolkoff, Amex's chairman and CEO, in a statement. "The Amex is committed to providing a high quality marketplace and we will continue to work closely with the SEC to enhance our regulatory program."
Wolkoff became the exchange's CEO in April 2005.