NYSE Fines 5 Member Firms, 10 Individuals

The New York Stock Exchange said Wednesday that it had disciplined five of its member firms, levying fines totaling more than $1.4 million for violations of exchange trading rules and federal securities laws.

In a related move, the exchange also imposed fines on 10 individual members and barred several of them from trading on the exchange floor.

Among the institutions cited was Citigroup Global Markets Inc., formerly known as Salomon Smith Barney. The exchange censured and imposed a $1-million fine against the firm -- a unit of financial services behemoth Citigroup Inc. -- for failing to ensure proper supervision of several representatives in an Atlanta branch office.

The NYSE contends that, from 1998 to 2001, some Citigroup brokers recommended to certain employees of telecom giant WorldCom Inc. that they exercise their employee stock options and hold the resulting shares on margin, or credit.

WorldCom shares subsequently collapsed after the company filed for bankruptcy protection.

The exchange said the representatives had not been “adequately supervised” by Citigroup. A Citigroup Global spokeswoman declined to comment.

A panel convened by the exchange to investigate the incident found that those recommendations “were made despite those customers’ varying risk profiles, investment experience or investment objectives.”

According to an NYSE statement, Citigroup consented to the actions without admitting to or denying the findings.

The exchange’s other actions included a $250,000 fine and a censure against McDonald Investments for supervisory and operational failings; a $150,000 fine against Southwest Securities Inc.; a $50,000 levy against Santa Monica-based Wilshire Associates Inc. for supervisory issues; and a $25,000 fine against Strasbourger, Pearson, Tulcin, Wolff Inc.