In a sign that it is beefing up its policing of retail stockbrokers, the Securities and Exchange Commission on Tuesday filed civil charges against two former PaineWebber Inc. brokers that it accused of cheating small investors.
The SEC in recent years has rarely taken such actions against individual stockbrokers, except in cases where they directly stole money from clients' accounts. The agency has mainly left it to the National Assn. of Securities Dealers and the stock exchanges to discipline brokers for so-called sales practice abuses. Such illegal actions include churning (heavily trading customer accounts just to generate commissions), making trades customers never asked for and misrepresenting the risks of securities sold.
SEC Enforcement Chief William McLucas has said the SEC is taking a harder look at brokerage offices and stockbrokers in response to criticism that the agency and the stock exchanges haven't been weeding out dishonest brokers.
The two former PaineWebber brokers named in the lawsuits Tuesday are Shlomo A. Sela, 55, of Houston, now said by the SEC to be a broker with Shearson Lehman Bros., and Roy Phillip La Bolle Jr., 42, of Darien, Ill. The SEC said La Bolle now works as an insurance and mutual fund broker for Metropolitan Life.
The charges were included in civil lawsuits the SEC filed in federal courts in Chicago and Houston. The suits are related to a disciplinary action the SEC took against PaineWebber in February for allegedly allowing violations of securities laws to go on in PaineWebber offices across the country.
The suits accuse Sela and La Bolle of churning, making trades customers hadn't requested and putting customers into unsuitably risky investments.