Ex-Chief of Big Brokerage Convicted in Mexico : Securities: He’s the first found guilty of a crime against the country’s securities laws. Prosecutors say a three-year sentence isn’t stiff enough.

The former chairman of Mexico’s second-largest stock brokerage this week became the first person convicted of criminally violating the country’s securities laws, but prosecutors condemned his sentence as too light.

Eduardo Legorreta, once the chairman of the brokerage Operadora de Bolsa, was convicted Tuesday of unregistered trading in Mexican Treasury bills but was acquitted of fraud and falsification of documents. He received three years in prison, a term that can be commuted in exchange for community service. He was also assessed a $4,000 fine.

Legorreta was one of four prominent stockbrokers arrested 17 months ago on charges of illegal trading. He has been in prison since his arrest. The Mexican State Department will decide whether the rest of his sentence can be exchanged for community service and, if so, which type.

Before Legorreta and the other three brokers, no individuals had been been prosecuted in Mexico for securities law violations. Until Mexico’s disastrous stock market crash in 1987, irregularities and investor complaints were handled as regulatory matters. The crash exposed a number of abuses, and since then Mexican securities laws and regulations have been tightened.

Legoreta faced a maximum sentence of 10 years, and federal prosecutor Amador Castro Vega, complaining that the defendant got off easy, said he may appeal. But Mexican Securities and Exchange Commission Chairman Oscar Espinoza Villarreal called the trial “an example of great importance” that demonstrates that the nation’s stock market regulations will be enforced.

Jaime Ceballos Martinez, assistant director of Operadora, who was arrested with Legorreta, was sentenced Tuesday to 16 months in prison and a $2,000 fine. He received credit for time served and was freed this week.

The fate of the other two suspects hasn’t been determined, as far as is publicly known. Both are from another brokerage.

Legorreta’s arrest received the most attention because he is a member of a prominent family that owned one of Mexico’s largest banks before nationalization in 1982. His brother, Agustin, is believed to be forming an investor group to buy a bank that the government has decided to offer them for private ownership.

The arrests were also interpreted as a political move to balance the jailing five weeks earlier of oil workers union leader Joaquin Hernandez Galicia, making the government appear evenhanded in its treatment of labor and business.

The accusations against the brokers stemmed from their actions during and after the international crash of October, 1987. The Mexican SEC received more than 1,200 complaints from investors who claimed that they were cheated during and after the crash, when the Mexican market dropped 74% in less than 40 days.

An arbitrator appointed by the agency had previously awarded $6 million in compensation to investors who claimed that they had been defrauded by Operadora. The settlements nearly bankrupted the firm, according to sources inside the company, but Operadora is now believed to be on sound financial footing, with $81 million in equity and $6.5 billion in investments under management.