Specialist Firms May Have Initial Settlement

Five New York Stock Exchange specialist firms tentatively agreed to pay $240 million in a settlement with the Securities and Exchange Commission late Tuesday to avoid civil charges for allegedly mishandling trades and skimming profits on the floor of the Big Board, people close to the talks said.

The five firms have agreed to pay $155 million to disgorge their allegedly illegal profits and an additional $85 million in fines, two sources said. The deal will not be final, however, until all five firms officially agree on all of the provisions in the settlement. The full commission, due to meet Thursday, must also approve it.

The sources said there still were some questions to be resolved that could torpedo the agreement.

NYSE officials had worked with the SEC on the case, though it was not clear whether the deal reached Tuesday also would include a resolution of NYSE rules violations.

The five firms -- LaBranche & Co., FleetBoston Financial Corp. subsidiary Fleet Specialist, Bear Stearns Cos. subsidiary Bear Wagner Specialists, Van Der Moolen Holdings and Goldman Sachs Group Inc. subsidiary Spear, Leeds & Kellogg -- received notices from the SEC last month that they could face civil charges for their activities.

Specialist firms manage the sale of stocks on the floor of the NYSE and often buy or sell shares from their own holdings to keep the market balanced and orderly. The specialist system, which involves an open auction for each trade, has been in place since 1792.