The New York Stock Exchange took disciplinary action Wednesday against a former Prudential Securities branch manager in Orange County, banning him from acting as a supervisor for six months for failing to stop one of his brokers from allegedly defrauding customers.
Michael Zaccaro, 44, had been in charge of Prudential's Laguna Hills and Newport Beach offices from 1985 to 1992. He currently is the Laguna Hills branch manager for the Los Angeles-based brokerage firm Crowell, Weedon & Co.
Zaccaro agreed to the penalty, which also included a censure, without admitting to or denying the allegations.
The NYSE charged that Zaccaro failed to supervise a broker, whom the exchange did not name. However, sources confirmed that the broker was Grant Ross, a one-time broker in Prudential's Newport Beach office who was fired in 1990. Ross could not be reached for comment. He has not worked in the securities business since leaving Prudential, according to Los Angeles officials of the National Assn. of Securities Dealers.
According to the NYSE, the broker advertised heavily for customers in The Times and other publications during the late 1980s, running ads that promoted high-yielding "foreign currency bonds."
A stock exchange disciplinary panel charged that the bonds were unsuitably risky for many of the unsophisticated investors who bought them and that the broker misrepresented the risks. The NYSE also charged that he heavily traded these and other bonds in the customers' accounts without permission and duped customers into borrowing so much money against the bonds that the interest on the loans exceeded the income from the bonds.
As branch manager, the exchange said, Zaccaro was required to review every trade made by his brokers and "knew or should have known" of improper trading in the accounts.
In a telephone interview Wednesday, Zacarro said, "I don't think any of this is fair," notwithstanding his agreement to settle the charges. "When the misdeeds were found out, the broker was fired for cause."
A Prudential Securities spokesman had no immediate comment on the charges. Most of the customers in the case had been reimbursed "at least to some extent" as a result of arbitration cases they brought, he said.
In an unrelated action, the NYSE on Wednesday imposed a $50,000 fine on the securities firm Dean Witter Reynolds Inc. for failing to file timely reports about brokers who were fired or had customer complaints filed against them.
The NYSE's disciplinary report said the penalty was at least the fourth since 1985 against Dean Witter for delays in reporting information about alleged wrongdoing by its brokers.
The exchange charged that from September, 1989, through last April, Dean Witter repeatedly failed to make prompt reports about arbitration cases, customer complaints and brokers who were fired because of wrongdoing.
A Dean Witter spokesman said the firm had no comment on the charges.
In response to mounting concern about dishonest stockbrokers, the Securities and Exchange Commission in recent months has been pressing the NYSE and other exchanges to crack down on firms that fail to promptly report alleged misdeeds by their brokers.
The SEC has said such failures prevent the exchanges from rapidly launching disciplinary investigations and keep investors from getting accurate information about brokers' disciplinary records.
Paltrow reported from New York and Vrana from Orange County.