Shearson Hit on Early Release of Data to Traders : Stock market: The brokerage, which agreed to a $500,000 fine, violated the ‘Chinese wall’ that attempts to prevent research departments from giving an unfair advantage to its own firm’s staff.

The New York Stock Exchange on Wednesday accused Shearson Lehman Bros. of giving the firm’s traders advance knowledge of new research reports on stocks, well before the reports were disseminated to Shearson’s customers.

The exchange, which regulates its member firms, said the early warning violated “Chinese wall” regulations meant to prevent brokerage research departments from giving an unfair advantage to the firms’ own traders. The research reports typically contain buy or sell recommendations and often have a significant impact on the price of a company’s stock.

The allegations were a surprise element in a package of disciplinary charges Shearson agreed to settle without admitting or denying guilt.

As expected, Shearson, a unit of American Express, also settled charges that it manipulated the price of ConAgra Inc. stock when Shearson brought a new issue of ConAgra shares to market in 1990. As previously disclosed, Shearson will pay a $500,000 fine to settle all the charges.

It was not immediately clear if Shearson’s trading desks had actually traded shares for the firm’s own accounts based on the early access to the research reports.

The exchange said its investigation showed that some of the firm’s traders erroneously believed it was permissible to liquidate positions based on the early warning. But the charges didn’t spell out if they had actually done so, and exchange officials declined to comment.

The alleged leaking of research reports occurred between April, 1990, and April, 1991. In a statement, Shearson said that it has changed its procedures and that “an internal review found no instances where the former procedures resulted in placing customers at a disadvantage.”

Shearson spokesman Steven H. Faigen refused to say if traders had bought or sold based on information in the stock analysts’ reports, but he said, “There was no improper use of research information in trading activities discussed.”

Alan R. Bromberg, a securities law expert at Southern Methodist University, said that if traders did buy or sell using the advance information, they might be guilty of insider trading, which is against federal law.

A Securities and Exchange Commission official declined to comment on whether the agency is looking into what use traders made of the research reports.

The stock exchange charged that a senior trading executive at Shearson was leaked advance information about proposed changes in the firm’s buy and sell recommendations on individual stocks in advance of meetings of the firm’s investment policy committee. That committee approves analysts’ new recommendations on stocks.

The exchange also said that during part of 1991 the firm’s trading desks routinely received research reports about 30 minutes before they were released to the rest of the firm and to customers.

In a separate allegation, the exchange charged that Shearson sold short ConAgra stock at a time when the firm was prohibited from doing so.

The stock at the time was on Shearson’s “Watch List,” and trading was restricted because the firm was about to underwrite a new offering of ConAgra stock. Short selling, a way of profiting from an expected drop in a stock’s price, involves selling borrowed shares in hopes of buying them back later at a lower price.

The $500,000 fine against Shearson is the second major fine the NYSE has imposed against the firm in less than a year.

Last July, the exchange fined Shearson $750,000 on charges that the firm’s big retail office at 55 Water St. in Manhattan had engaged in numerous practices harmful to customers, including excessive trading of customers’ accounts and taking undisclosed commissions. Shearson also settled those charges without admitting or denying guilt.

Peter J. DaPuzzo, Shearson’s co-head of equity trading who was accused of ordering the ConAgra manipulation, said Wednesday that he resigned and had taken a post with Steinhardt Partners, a big investment manager. As previously disclosed, DaPuzzo agreed to settle charges stemming from the alleged price manipulation without admitting or denying guilt, and agreed to pay a $100,000 fine.