FINANCIAL MARKETS : Drexel Closes Spanish Office After Improper Sale of Shares

Drexel Burnham Lambert Inc. closed its office in Spain on Monday after determining it had improperly sold to private institutions shares in a large European oil company that were intended for individual investors.

Drexel said it shut the office independently of an investigation by Spanish officials into the stock sales during a partial privatization of Repsol SA earlier this year.

“We said some time ago that the new Drexel would not countenance improper behavior, and we meant it,” Drexel Chief Executive Frederick H. Joseph said in a statement.

Drexel said it had determined that its Spanish affiliate, DBL Capital Markets Espana SA in Madrid, used the names of 400 individual investors to obtain 97,600 shares of Repsol but sold the stock to a few private institutions instead.

Sold to Private Institutions

The investment firm, which has offices worldwide, said all but 17,815 of the shares went to institutional clients and the rest went into a trading account at Drexel. The firm said it made $123,069 in commissions and trading profits on the transaction.

Spain’s National Securities Commission alleged that Drexel falsified documents during Repsol’s offer of 79.95 million shares at the equivalent of $14.70 each, worth $1.14 billion. The shares were sold to 400,000 investors worldwide from April 20 to May 6.

In a filing with Spanish securities regulators, Drexel requested a block of the shares worth about $60 million and said that they would go to the 400 individual investors. But officials said that on May 11, the first day of public trading, Drexel improperly sold the shares to the private institutions.

Spanish regulators said last week that some of the 400 investors, mainly friends and relatives of Drexel employees, were unaware their names had been used as nominees for the stock in Repsol, Europe’s eighth-largest oil company.

Results of the investigation in Spain have not been announced.

Drexel could be fined up to five times the profit on the transaction in the case, according to reports from Spain. Criminal charges also are possible if Drexel used investors’ names without their permission, the reports said.

Drexel also said it was withdrawing its application for a brokerage license in Spain. The firm said Spanish authorities had not requested the withdrawal.