U.S. STOCK EXCHANGE

Press, Volume CI, Issue 29715, 8 January 1962, Page 16

U.S. STOCK EXCHANGE

Report Highly Critical

(N .Z-PA.-Reuter—Copyright)

WASHINGTON, Jan. 7. Federal investigators have accused the American Stock Exchange of permitting “manifold and prolonged” abuses of laws and rules designed to protect investors. The Securities and Exchange Commission, ending a seven-month investigation of the nation’s second largest stock exchange, issued a 127page report which contended that the exchange had been dominated by a four-man oligarchy. The director of the inquiry, Mr Milton Cohen, told a press conference that the commission would take action against some of the persons alleged to be responsible for the abuses. The Associated Press said the report was perhaps the ‘ most explosive” ever issued by the commission. The S.E.C. report accused the exchange of tolerating lax management and said that if it did not act quickly to adopt broad reforms “the commission must be prepared to exercise its supervisory powers.

“The manifold and prolonged abuses by specialists and floor traders and other instances of misconduct described in this report make it clear that the problem goes beyond isolated violations and amounts to a general deficiency of standards and a fundamental failure of controls,” the commission said. The investigation of the American Stock Exchange, based in New York, grew out of a sensational case involving the father-and-son team of specialists, Jerry and Gerald Re. The SEC expelled them from the exchange and barred them from engaging in the securities business on May 4, 1961.