Sep. 30–New York Stock Exchange’s interim leader John Reed wants to set new rules for its operations before sacking any of the beleaguered board.
It’d be “quite foolish to look at the membership of the board and then at governance,” Reed said.
Reed traveled to Washington for a 90-minute meeting yesterday with Securities and Exchange Commission chairman Bill Donaldson, himself a former NYSE head.
The 64-year-old Reed, who said he’s in a “listening mode,” faces the challenge of restoring confidence in the 211-year-old exchange.
“My responsibilities are clear,” Reed told a press conference in Washington, “the exchange has to look at reforming its corporate governance and its managerial architecture.”
A retired co-chairman of Citigroup, Reed returned from France Friday and said he wanted to reach some conclusions “sooner rather than later. It can’t be something that’s at odds with the SEC’s views, it can’t be at odds with the floor members of the exchange.”
Before Reed’s first official day at the helm, two board members had resigned: former state controller Carl McCall and DaimlerChrysler chief Juergen Schrempp.
Also, Merrill Lynch CEO Stan O’Neal reportedly would consider stepping down from the NYSE board.
And, NYSE senior managing director Georges Ugeux quit to start his own consulting firm.
Meanwhile, the SEC’s staff recommended that hedge fund managers be required to register with the agency.
The staff, which has been conducting a review of these investment portfolios of the wealthy, said registered hedge funds should be subject to regular inspections. That could lead to earlier detection of misconduct and help prevent fraud.
“It’s the first step in the SEC knowing where the players are,” said Tim Ghriskey, founder of hedge fund Ghriskey Capital. “It’s probably the first step in regulation of the industry.”
The SEC staff also expressed concern how hedge fund managers value their investments, which are not reviewed independently.
At least three of the five SEC commissioners must approve staff proposals if they are to become policy.
Meanwhile, SEC inspectors said the American Stock Exchange failed to monitor options trading in violation of an order requiring stricter enforcement, then lied about it to regulators, Bloomberg News reported.
“The staff is seriously concerned” that violations in the Amex’s handling of trades “are continuing to go undetected, unreviewed and unsanctioned,” SEC compliance director Lori Richards said in a letter to Amex CEO Salvatore Sodano.
The alleged shortcomings at the Amex further intensify the SEC’s focus on the exchanges.
The Amex said in a statement it was “cooperating fully” and has taken a series of steps in response to the alleged violations.
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