SEC: Lax oversight at exchange

PHILADELPHIA -- The Philadelphia Stock Exchange fails to adequately enforce trading rules or discipline errant members, inspectors from the Securities and Exchange Commission charged after a recent review.

The SEC found what it termed "serious deficiencies" in the exchange's regulatory programs, and said a staff member had once misled investigators.

The SEC investigators, who issued three reports, also alleged that the exchange failed to enforce rules meant to make sure that investors got the best price on securities trades.

"In light of the serious nature of these findings, the inspection reports have been provided to the commission's Division of Enforcement for further action," Lori Richards, an SEC compliance director, wrote in a Feb. 13 letter on the subject.

She met with the board on March 1 in a special meeting.

The SEC declined to comment on the reports, which are not official findings.

If the enforcement staff determined that the alleged deficiencies warranted action, it could request the commission's approval to go to federal court to seek sanctions such as monetary penalties or court orders barring certain activities.

"What deficiencies the SEC has identified, we're in the process of fixing," Meyer S. "Sandy" Frucher, the exchange's chief executive, told The Philadelphia Inquirer .

Frucher declined comment on specifics in the reports.