Nasdaq Dealer Fined $15,000 for Late Reporting : Markets: Sherwood Securities says the delay was unintentional. NASD also imposes fines on two small N.J. companies.

NEW YORK —  Continuing a crackdown on Nasdaq trading rule violations, the National Assn. of Securities Dealers said Monday that it fined Sherwood Securities Corp. $15,000 for the late reporting of 6,272 trades.

New York-based Sherwood, one of the biggest Nasdaq dealers, agreed to the fine without admitting or denying wrongdoing. The NASD alleged that Sherwood was late in reporting more than 8% of its 74,083 trades in Nasdaq stocks during a two-week period in October, 1994.

Sherwood blamed the late reports on a computer problem and denied that the delay was intentional.

Under NASD rules, trades are supposed to be reported to the public “tape” within 90 seconds of execution, so that investors have current information on stock prices. But a Times series last year reported that late reporting by Nasdaq dealers was rampant, and that the NASD hadn’t taken any public disciplinary action against dealers who broke the rule.

Since then, the NASD has come under investigation by the Securities and Exchange Commission, which is contemplating bringing charges against it for failure to enforce Nasdaq trading rules. The NASD has denied that it was lax, but this year has begun taking public disciplinary action for late-trade reporting, as well as another allegedly common violation, the failure by dealers to honor publicly quoted prices.

The action against Sherwood is the NASD’s second this year for late-trade reporting. In August, it imposed a $20,000 fine on Mayer & Schweitzer, a unit of discount broker Charles Schwab & Co.

In the first of what it says will be several public disciplinary cases against dealers who fail to honor publicly quoted prices, it fined Morgan Stanley Group $19,000 several weeks ago. The Schwab subsidiary and Morgan Stanley agreed to the fines without admitting or denying the charges.

The NASD also imposed fines Monday of $13,600 and $23,200 against two small New Jersey firms that have been harsh public critics of the NASD and its supervision of Nasdaq.

The firms, which share offices in Montvale, N.J., are All-Tech Investment Group and HMS Securities. The companies are part of a group of Nasdaq dealers the NASD has criticized for making heavy use of its Small Order Execution System, or SOES.

The firms agreed to the fines without admitting or denying charges that they violated NASD rules by making short sales through SOES. A short sale occurs when a dealer sells stock it doesn’t own in anticipation of buying it back at a lower price, pocketing the price difference. Dealers are allowed to sell short through other Nasdaq trading systems.

The two companies had vigorously fought the charges and asserted that the NASD was applying a new interpretation of the rule after the fact, partly in retaliation for the firms’ public criticisms of it. The NASD denied it was retaliating.

Linda Lerner, general counsel for both firms, said they decided to settle because the battle was becoming too costly. “We had already spent $100,000 [in legal fees] fighting them on this,” Lerner said. “We didn’t feel like spending another quarter of a million dollars litigating with them, which is what it would have cost.”