Stock Specialist Firm Fined for Securities Fraud

A specialist firm on the New York Stock Exchange was fined $480,350 for securities fraud by a judge who said he imposed the sentence as a deterrent.

“The trading while in possession of confidential material is a crime.” U.S. District Judge Charles S. Haight said Thursday at the sentencing of Marcus Schloss & Co. “It constitutes an affront to the fair operation of the marketplace.”

Prosecutors said Marcus Schloss was the first NYSE firm to be convicted of felony charges related to insider trading.

The company was convicted last July of conspiracy to trade on inside information and of securities fraud in connection with its March 1986 purchase of stock in American Brands Inc.

Marcus Schloss could have been fined a maximum of $1 million--$500,000 for each of two counts.

Haight, however, said he considered only a fine of $500,000 because both charges stemmed from the American Brands deal.

From that amount, the judge said he subtracted $19,650 which the company previously paid the Securities and Exchange Commission to settle civil charges stemming from the American Brands trade.