SEC, Dozens of Bond Sellers May Settle : Securities: The banks and brokerages, accused of hyping orders for government-backed debt, want to avoid costly government litigation.

Dozens of Wall Street firms are expected to settle government allegations soon that they hyped orders for the debt of government-backed agencies.

People familiar with negotiations between the Securities and Exchange Commission and the firms said such a uniform settlement plan would allow the banks and brokerages to resolve the matter and avoid costly government litigation.

Fines may vary from firm to firm, however.

The SEC has threatened to bring more allegations against individual firms if no deal is reached. A settlement would allow the agency to avoid court battles with about 100 brokerage firms and banks involved, the sources said.

The talks spring from the SEC’s probe of firms that help government-sponsored agencies such as the Federal National Mortgage Assn. (Fannie Mae) and the Federal Home Loan Bank Board (Freddie Mac) borrow money by selling their bonds and other debt securities.

After Salomon Bros. admitted in August that it had inflated customer orders and supplied false data about its dealings in the multibillion-dollar market for government agency debt, other firms said they had done so also. Salomon made the disclosures after admitting separately that it had violated rules at Treasury bond auctions.

By puffing up orders, the firms hoped to ensure that they received enough securities to supply their customers.

Last month, the SEC offered the firms a blanket settlement of the charges. SEC officials and representatives of the firms have been holding discussions, and the agency is expected to propose soon a uniform set of terms.

“I think what you’ll find is there will be a global settlement,” said Theodore Levine, a Washington securities lawyer with Wilmer, Cutler & Pickering, which represents several of the firms. “It’s an effective and efficient way for the SEC to resolve this matter.”

Harvey Pitt, a partner with Fried, Frank, Harris, Shriver & Jacobson in New York, said, “Most firms will be inclined to go along.”