Shearson to pay $750,000 fine to Exchange

April 03, 1991|By New York Times

NEW YORK -- Shearson Lehman Bros. has agreed to pay $750,000 to the New York Stock Exchange to settle accusations of violations of the exchange's rules at one of the brokerage firm's most profitable branches.

In a filing with the Securities and Exchange Commission, Shearson said it had agreed to settle a variety of charges about improper practices at a lower Manhattan office, known as the Water Street branch, without admitting or denying guilt. The charges concern activities that occurred in 1986, when the stock market was booming.

In the filing, Shearson said that as part of the settlement it would accept a censure from the Big Board and provide the exchange with a written report detailing the findings of an audit of the procedures and controls in Shearson's margin loan department.

Employees at Shearson and other Wall Street executives said that the charges included accusations that purchases were made for customer accounts without the knowledge or permission of the clients.

If clients objected to the purchases, the securities were often "parked" in a series of inactive accounts, Wall Street executives said.

The securities were said to have been improperly held in those accounts until they were subsequently sold to another customer or into the marketplace.

Those activities were only part of a larger series of rule violations, Wall Street executives said. The New York Stock Exchange also charged that the Water Street branch had failed to keep proper books and records.

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