Olde Fined for Fraud by SEC, NASD

Brokerage firm Olde Discount Corp. and three top officials, including its founder and chairman, agreed Thursday to pay more than $5 million in fines to settle federal regulators’ allegations of defrauding customers.

The Securities and Exchange Commission said Olde’s compensation, hiring and training policies for brokers created an environment that encouraged high-pressure and fraudulent sales techniques.

The practices by the Detroit-based discount brokerage allegedly included churning--excessive trading in customers’ accounts for the purpose of racking up brokers’ commissions, unauthorized trading in customers’ accounts and lying to customers.

The SEC said the violations took place from the fall of 1992 at least through August 1995.

“This action makes clear that brokerage firms must place the interests of their clients first,” said SEC Chairman Arthur Levitt. “This case should send a very strong message that abusive practices will be vigorously punished and that officials at all levels will be held accountable.”

In a related action, the self-policing arm of the National Assn. of Securities Dealers fined Olde $1.35 million. It also imposed a $500,000 fine and 18-month suspension from the securities industry on Ernest J. Olde, the firm’s founder and chairman of its parent company.

Starting in April 1993, the company began a major national advertising campaign promoting “commission-free” trading for certain qualified investors but failed to disclose in the ads that its brokers derived financial benefits from such trades, the NASD said.

In agreeing to the settlements with the SEC and the NASD, Olde neither admitted nor denied wrongdoing.

The company said it took steps more than three years ago to prevent problems in the future by improving its management, compensation practices and training and supervision of brokers.