SEC Fines 28 Brokerage Houses
By MARCY GORDON AP Business Writer
WASHINGTON (AP) - Federal regulators announced today they
are fining 28 Wall
Street firms a total of more than $26 million for alleged
price-rigging on the Nasdaq
Stock Market, in an industrywide settlement closing a
five-year-old landmark case.
The Securities and Exchange Commission has been negotiating
the settlement with the
brokerage firms for months. The agreement involves many of
Wall Street's biggest
names - including PaineWebber Group Inc. (NYSE:PWJ - news),
J.P. Morgan & Co.,
Salomon Smith Barney Inc., Morgan Stanley Dean Witter & Co.,
Lehman Brothers Inc.
and Merrill Lynch & Co. The case goes 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 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 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 settlement also
requires the firms to
improve their trading policies and procedures, SEC officials said.
''Thanks to effective leadership, today Nasdaq is stronger and
better,'' SEC Chairman
Arthur Levitt said in a statement. ''The sound reforms
implemented over the past several
years, and the commitment to strong oversight, greatly enhance
investor protections and
reaffirm confidence in the Nasdaq market.''
A year ago, investors who sued the Wall Street giants in a 1994
class action won $910
million from 30 firms in a settlement - the largest ever for such a
civil antitrust suit.
The SEC did not disclose the individual fines to be paid by each
brokerage firm.
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.
Dealers delayed reporting major trades when it could hurt their
stock holdings, the SEC
said. Calling themselves ''friendly competitors,'' dealers swapped
trading plans or
important company news before the public found out.
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 National
Association of Securities Dealers, the self-policing body that
operates the Nasdaq
market, 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.,
Mayer & Schweitzer Inc., Olde Discount Corp., CIBC
Oppenheimer Corp., Piper
Jaffray Inc., Prudential Securities Inc., Raymond James &
Associates Inc.,
Robinson-Humphrey Co., Sherwood Securities Corp., Spear,
Leeds & Kellogg,
Tucker Anthony Inc. and Warburg Dillon Read. |
