Greenberg Specialist Beef Seen As Proper
By Daniel Hays
NU Online News Service, Oct. 3, 4:33 p.m. EDT?A spokesman for American International Group said the company management was only doing what it was supposed to do when its chairman complained about the way a New York Stock Exchange floor firm handled purchases of AIG stock.
The company's reaction came after The Wall Street Journal reported that former NYSE Chairman Dick Grasso applied unusual "pressure" to the floor specialist firm to buy more AIG stock following complaints by Maurice "Hank" Greenberg, AIG's chief executive officer and chairman.
In the opinion of several persons with expertise in the market, in Mr. Greenberg's actions there was nothing unusual or improper.
The Journal quoted a letter from Mr. Greenberg to Mr. Grasso last October complaining the specialist's activity was unsatisfactory and stating "I can do much better on another Exchange."
The AIG specialist he complained of was Goldman Sachs Group Inc.'s Spear, Leeds & Kellogg unit.
"We have an obligation to our shareholders to speak out," said the AIG spokesman regarding the specialist's activity. He did not rebut or deny the newspaper's report, but did state that "from time to time AIG has expressed concerns to the New York Stock Exchange as well as the Securities Exchange Commission when it had reason to believe that the market and its shares was not being conducted in accordance with all of the applicable laws, rules and regulations."
According to Roy C. Smith, a New York University professor of finance and former Goldman partner, Mr. Greenberg's complaints were not improper, "He can say what he wants. What law does that break?"
Mr. Smith said only if there had been an inflation of the stock would there be improper conduct.
Edward Kwalwasser, NYSE group executive vice president for regulation did not discuss Mr. Greenberg's activity, but said the exchange gets many written inquiries from CEOs who have concerns.
John Heine an SEC spokesman said that agency would only be involved if there was market manipulation involved.
Specialist firms act to match buy and sell orders from investors and when there is disagreement over price are required to use their own capital to facilitate trading.
Mr. Smith said companies have little say in who is assigned as their specialist and many CEOs "think their specialists fail to do all for them that they would like."
He noted that the requirements for specialists are vaguely defined as a duty to "maintain an orderly market."
A spokesperson for the NYSE Diana DeSocio said Mr. Greenberg's complaints were not part of an inquiry, announced in April as to whether specialist firms had failed their obligation to get out of the way when there was a natural match between a buyer and seller.
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