NASD Fines Brokerage
ENGLEWOOD, Colo. (AP) _ The National Association of Securities Dealers has fined Stuart-James Co. more than $2 million for overcharging companies, one of the largest fines ever levied against a brokerage firm by NASD.
The alleged overcharges involved more than 4,000 stock transactions in 1988, said NASD, which policies over-the-counter stock markets.
Stuart-James is one of the nation’s largest over-the-counter investment banking firms with 40 retail offices nationwide and over 1,000 brokers.
NASD announced Thursday that as part of its settlement with the Englewood- based brokerage, NASD was fining Stuart-James $1.9 million; its president and owner James Padgett $105,000; its former chairman and co-owner Stuart Graff $25,000, and its head trader, Steven Pata, $30,000.
Padget also was barred from being involved in a supervisory capacity in the company’s markup area for six months, and Graff was suspended from acting as the company’s principal for 60 days under the agreement. NASD also suspended Pata for 20 days. The parties agreed to the sanctions without admitting or denying guilt.
NASD said the Stuart-James markups ranged from 6.9 percent to 153 percent over their cost, when the firm dominated and controlled the trading of the securities.
In the settlement announced Thursday, the company and its officials consented to findings that NASD rules were violated in markups charged customers in four low-priced securities: Meadow Group Inc., a NASDAQ stock exchange-listed security, and three penny stocks - Celerity Coputing Inc; 1992 warrants for International Design Group Inc., and National DataComputer Inc.
As part of the settlement, Stuart-James also agreed to change certain business practices, some of which the company dropped more than a year ago.
For instance, it agreed to stop making markets in penny stocks and to send customers written confirmation of the highest ask and bid prices in certain securities at the time of sale.
The settlement also calls for an independent consultant to review the firm’s trading practices and procedures, to prepare reports and to make recommendations to both the brokerage and NASD.
Last year, the Securities and Exchange Commission filed excessive markup charges against the firm and also accused it of a number of other securities violations.
Stuart-James, Padgett, Graff and other current and former executives of the firm now are on trial before an SEC administrative law judge.