Securities Probe Focuses on Clearing Agent Role; Could These Low-Profile Middlemen Help Police Trading Abuses by Their Customers?

LaGesse, David, Albert, Andrew, American Banker

Securities Probe Focuses on Clearing Agent Role

Could These Low-Profile Middlemen Help Police Trading Abuses by Their Customers?

Federal regulators, as part of their larger inquiry into the recent wave of securities dealer failures, say they are focusing on the role of clearing agents in the U.S. government securities market.

A key question under study is whether those agents could help prevent fraudulent transactions, including misuse of collateral, by maintaining an independent record of the dealers' transactions with customers.

The inquiry has turned a spotlight on the otherwise low-profile middlemen in securities trading--the agents that hold and transfer securities on behalf of dealers. The unusual attention has sullied the reputations of two premier banking organizations. Security Pacific Corp. and Fidata Corp., whose subsidiaries served as clearing agents for the two largest government securities dealers to collapse.

Without accusing the clearing agents of any wrongdoing, Chairman John S.R. Shad of the Securities and Exchange Commission told Congress this week that one focus of his agency's inquiry is on the activities of Fidata's clearing unit.

Some officials investigating the recent failures of the E.S.M. Government Securities Corp. and Bevill, Bresler & Schulman Asset …

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Publication information: Article title: Securities Probe Focuses on Clearing Agent Role; Could These Low-Profile Middlemen Help Police Trading Abuses by Their Customers?. Contributors: LaGesse, David - Author, Albert, Andrew - Author. Magazine title: American Banker. Volume: 150. Publication date: May 17, 1985. Page number: 1+. © 2009 SourceMedia, Inc. COPYRIGHT 1985 Gale Group.

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