Knight Announces Agreement in Principle With Staffs of SEC and NASD

JERSEY CITY, N.J., July 7 /PRNewswire-FirstCall/ -- Knight Trading Group,
Inc. (Nasdaq: NITE) today announced that its wholly owned subsidiary, Knight
Securities, L.P. (KSLP) had reached an agreement in principle with the staffs
of the U.S. Securities and Exchange Commission (SEC) and NASD to settle
investigations in connection with specific institutional trade activity,
conduct and supervision that occurred in 1999 through 2001; and books and
records, document production and record-keeping deficiencies. The agreement
in principle is subject to the drafting of settlement papers and final
approval by the SEC and NASD. The agreement in principle involves Knight
Securities, L.P., an over-the-counter trading subsidiary renamed Knight Equity
Markets, L.P., effective September 1, 2003. Knight Equity Markets, L.P. is a
subsidiary of Knight Trading Group, Inc. (Knight).
Under the terms of the agreement in principle, KSLP would disgorge
approximately $41 million in institutional trading profits, and pay $13
million in interest and $25 million in penalties. The SEC and NASD would then
determine how the funds would be distributed. KSLP expects the proposed
settlement to take the form of an administrative order, in which KSLP would
neither admit nor deny the findings.
Knight will take a pre-tax charge of approximately $79 million in the
second quarter, which ended June 30, 2004, relating to the agreement in
principle.
"Knight understands that we have a responsibility to our clients to
provide superior trade execution services and to serve as a trusted business
partner who values the importance of client relationships," said Thomas M.
Joyce, Chief Executive Officer and President of Knight Trading Group. "The
agreement in principle announced today demonstrates the management team of
Knight that arrived after May 2002, together with our employees, is committed
to resolving the regulatory inquiries we inherited. We believe that the
agreement in principle is an important next step in closing the chapter on
these issues. We will continue to pursue our client-focused strategies to
build Knight's business platform and future prospects."
The findings concerning KSLP will include violations of the antifraud
provisions of Section 15(c)(1) of the Securities Exchange Act of 1934
(Exchange Act) and associated rules. The findings will also include
violations of the SEC books and records rules (Rules 17a-3 and 17a-4 under the
Exchange Act) in connection with the retention of e-mails and order tickets
and the use of trade modifiers; violations of NASD rules concerning the
production of books and records (NASD Rule 8210); failures to supervise under
Exchange Act Section 15(b)(4)(E) and NASD Rule 3010; and violations of NASD
rules (including just and equitable principles of trade (NASD Rule 2110)) in
connection with the use of trade modifiers and the filing of NASD Form U5
notices for certain former employees. KSLP would neither admit nor deny the
findings. The agreement in principle is subject to the drafting of settlement
papers and final approval by the SEC and NASD.
The proposed settlement would resolve the matters for which Knight
Securities, L.P. received Wells Notices from the staffs of the Division of
Enforcement of the SEC and from NASD's Department of Market Regulation.
Knight previously announced the receipt of the Wells Notices on March 4, 2004.
The agreement in principle does not address the Wells Notices received by four
former employees of KSLP. The agreement in principle also does not address
the private arbitration claim against KSLP made by a former KSLP employee
relating to his employment and termination, as Knight originally disclosed in
its Form 10-Q for the quarter ending June 30, 2002, and as updated in
subsequent securities filings. Knight continues to defend against the private
arbitration claim.

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Originally posted by poorman:
Good start but I don't like the part about the SEC deciding how the money will be distributed as that probably mean they keep it and we get ****** again.

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