Old news to us:
Monday January 11, 4:49 pm Eastern Time
SEC Fines 28 Brokerage Houses $26M
By MARCY GORDON
AP Business Writer
WASHINGTON (AP) -- Closing a 5-year-old case in which big Wall Street firms were accused of cheating investors out of billions of dollars, federal regulators are fining 28 brokerages more than $26 million for alleged price-fixing on the Nasdaq Stock Market.
The Securities and Exchange Commission has been negotiating the industrywide settlement with the brokerage firms for months. The agreement announced Monday involves many of Wall Street's biggest names, including PaineWebber Inc., J.P. Morgan & Co. and Merrill Lynch & Co.
The case stretches back to 1994, when the SEC and the Justice Department alleged that major dealers on the electronic Nasdaq market conspired in a form of price-fixing that cost ordinary investors billions of dollars on their stock trades.
Under the settlement, the brokerage firms with the most alleged violations agreed to pay higher fines. In addition to $26.3 million in civil fines, the firms also agreed to pay back alleged illegal profits totaling $791,525.
The SEC also brought civil charges against 51 individual traders for the brokerage firms, temporarily suspending them from the securities business. The brokerage firms and the traders, who agreed to the sanctions, neither admitted nor denied wrongdoing.
The charges against the traders ''would send a very strong message on the Street that you cannot hide under cover of your'' brokerage firm, said Robert Skirnick, a securities attorney.
Skirnick represented investors who sued the brokerages in a 1994 class action and won $910 million from 30 firms in a settlement a year ago -- the largest ever for such a civil antitrust suit.
The settlement also requires the firms to improve their trading policies and procedures, SEC officials said.
Among those penalized were PaineWebber, fined $6.3 million; J.P. Morgan, fined $1.27 million and ordered to repay $42,218 in allegedly illegal profits; Prudential Securities Inc., fined $1 million and ordered to repay $1,361; Salomon Smith Barney Inc., fined $995,000 and ordered to repay $27,988; Morgan Stanley Dean Witter & Co., fined $350,000 and ordered to repay $4,170; and Merrill Lynch, fined $472,500.
Merrill Lynch, the nation's largest brokerage firm, said it decided to participate in the settlement because the ''limited allegations'' against it involved practices that occurred more than four years ago and no longer exist.
And PaineWebber said it has ''cooperated fully with regulators and has instituted policies and procedures to address the issues raised in their investigation.''
But Alan Davidson, president of a small brokerage firm and of the Independent Broker-Dealer Association, said the fines in the new settlement may have been insufficient for Wall Street giants with billions in earnings.
''I'm not so sure that the punishment equated to the crime,'' said Davidson, a longtime critic of the National Association of Securities Dealers who recently won election to its board of governors. The NASD, a self-policing body, operates the Nasdaq market.
In making its original case, the SEC charged that major Nasdaq dealers harassed or refused to trade with others who tried to offer investors a better price for a stock. Other times, the powerful dealers allegedly colluded in a form of price-fixing.
In a 1996 civil antitrust settlement with the Justice Department, 24 of the 37 brokerages agreed to improve their compliance procedures and tape-record some phone calls made and received by traders. The Wall Street firms, which neither admitted nor denied wrongdoing, were not fined.
In its own settlement with the SEC in 1996, the NASD similarly did not admit or deny wrongdoing. The SEC censured the dealers' group, saying it broke federal securities laws and its own rules in failing to enforce the rules on the Nasdaq, the nation's second-largest stock market. The NASD agreed to spend $100 million over five years to improve market surveillance.
The brokerage firms involved in the new settlement also include Bear Stearns & Co. Inc.; Cantor Fitzgerald & Co.; S.G. Cowen Securities Corp.; CS First Boston Corp.; Donaldson, Lufkin & Jenrette Securities Corp.; Gruntal & Co.; Hambrecht & Quist; Herzog, Heine, Geduld Inc.; Jefferies & Co. Inc.; Legg Mason Wood Walker Inc.; Lehman Brothers Inc.; Mayer & Schweitzer Inc.; Olde Discount Corp.; CIBC Oppenheimer Corp.; Piper Jaffray Inc.; Raymond James & Associates Inc.; Robinson-Humphrey Co.; Sherwood Securities Corp.; Spear, Leeds & Kellogg; Tucker Anthony Inc. and Warburg Dillon Read. |
