The New York Stock Exchange today fined Lehman Brothers Holdings Inc. US$500,000 in connection with a 2002 trade that regulators say gave the firm a profit and potentially harmed customers.

The sanction came in response to supervisory and internal control violations and failure to adhere to the principles of good business practices in connection with a proprietary trading strategy to facilitate customer sell orders. Lehman also pledged to complete an internal review.

The NYSE said that on Dec. 11, 2002, Lehman effected several transactions at or near the close of trading that were disruptive and caused excess market volatility. It also found that Lehman failed to have reasonable policies and procedures in place to supervise these sorts of trades, and that it failed to have adequate controls in place to evaluate and scrutinize the risks associated with such trading and to prevent such trades from occurring at the close.

In settling these charges brought by NYSE Regulation, Lehman Brothers neither admitted nor denied the charges.

“It is vital for firms to carefully supervise trades relating to business strategies pegged to the closing price to protect customers and the market from excess volatility,” said Susan Merrill, chief of enforcement, NYSE Regulation.