NYSE Suspends L.A. Broker in Fraud Case : Securities: Exchange says trader bilked elderly, semiliterate woman. He neither denies nor admits guilt in settlement.
The New York Stock Exchange announced disciplinary action Wednesday against a Los Angeles stock broker who allegedly defrauded an elderly, semiliterate woman of much of her life savings.
Under a settlement in which the broker, David C. Stewart, 31, neither admitted nor denied guilt, the NYSE imposed a censure and a four-month suspension from the industry.
Details of Stewart’s handling of the account were first disclosed in a 1993 series in The Times on brokers at major Wall Street firms who victimized customers. The series also reported that the NYSE and other stock exchanges often took years to investigate violations by brokers, during which brokers were often able to move from one firm to another and in some cases cause harm to more clients.
The NYSE charges against Stewart follow an investigation by the Big Board that took more than 3 1/2 years and relate to events in 1990. At that time, Stewart worked in the Century City office of Prudential Securities. The case involved Edna Tona, now in her early 70s, who has worked for more than 40 years as a dietitian’s assistant at the Department of Veterans Affairs hospital in Brentwood.
By late 1989, Tona had saved more than $100,000, which she kept in a savings account. At the suggestion of her banker, she sought a broker to invest much of her savings. She was ultimately referred to Stewart. According to the NYSE charges, Stewart churned her account, rapidly buying and selling securities just to run up brokerage commissions. In several instances, he bought and sold a stock on the same day. The NYSE said Stewart also put Tona into investments that were unsuitably risky and bought options for her account even though she had not authorized such trading.
The NYSE also charged that Stewart intentionally falsified order tickets to indicate that Tona had requested the trades. In an interview in 1993, Tona said she had never learned to read well and could not read the monthly statements and other material she received from Prudential. According to her lawyer, Tona’s losses amounted to over $50,000. But in 1991 she agreed to a $37,000 settlement with Prudential and Stewart.
In 1992, Stewart left Prudential to work in Merrill Lynch’s Beverly Hills office, and in June, 1994, he was hired by Bear Stearns in Century City. National Assn. of Securities Dealers records show that Bear Stearns ended Stewart’s employment in December because of the NYSE investigation. Bear Stearns declined to comment.
The same records show that while Stewart was at Merrill, a complaint against him by another customer led to an $8,000 settlement.
Stewart did not respond to a message left on his home answering machine. His lawyer, Stephen L. Ratner, declined to comment on the case. Ratner said he believes that Stewart has not been working in the securities industry since he left Bear Stearns.
Tona’s lawyer, Lionel Z. Glancy, said this was not a complicated case for the NYSE to investigate and added that the exchange should devote more resources to processing cases quickly to protect the public.
Raymond Pellecchia, a NYSE spokesman, said the case took a long time to investigate in part because the Big Board had to look into allegations involving Stewart’s other customers, allegations that were not included in the charges. “While we would have liked to have completed the case more quickly, we did obtain a very positive result,” Pellecchia said.
* UNIFORM BROKER FEES
Prudential will stop paying brokers more for selling in-house products. D3
