Brokerage Pays $400,000, Settles Illegal Trading Case
A New York brokerage firm whose former employee pleaded guilty to insider trading charges in the 1986 “Yuppie Five” Wall Street scandal agreed on Wednesday to pay more than $400,000 to settle charges that it profited from the scheme.
In U.S. District Court in New York, the Securities and Exchange Commission charged Marcus Schloss & Co. and a former vice president of the brokerage with illegal stock trading during 1985 and 1986 based on tips stolen from a New York law firm that employed one of the five defendants.
The Yuppie Five, all under the age of 30, earned that name when they pleaded guilty in 1986 to insider trading charges in the initial wave of what was to become a huge Wall Street scandal.
Agreed to Censure
Without admitting or denying the SEC’s allegations, Marcus Schloss agreed to settle the civil charges by returning $136,900 in illegal profits and paying a $273,800 fine levied under the Insider Trading Sanctions Act, enacted in 1984 to stiffen penalties for that white-collar crime.
Marcus Schloss also agreed to a public censure from the SEC to settle a related administrative action, said it would retain an independent consultant to review its policies and procedures and pledged to abide by federal securities laws in the future.
Douglas Yagoda, a former Marcus Schloss vice president and head trader, was also charged by the SEC with insider trading but has not settled the charges.
Yagoda could not be reached for comment. A Marcus Schloss spokesman said Yagoda’s past record was “without blemish,” and said he had withdrawn from the firm “in order to concentrate on disproving all charges against him,” a move that Marcus Schloss fully supports.
The spokesman, who said charges against Marcus Schloss reflected the actions of a former junior employee, said the firm’s own settlement puts the case to rest and allows its business to proceed without any limitations.
Specifically, the SEC charged Marcus Schloss with making illegal stock trades between December, 1985, and March, 1986, based on non-public information concerning proposed or expected tender offers or takeovers involving Union Carbide Corp., Avondale Mills and American Brands Inc.
The SEC charged that Marcus Schloss traded on the non-public information at the order of Yagoda, who received the data from former Marcus Schloss research analyst Andrew Solomon, one of the Yuppie Five.
