WASHINGTON -- BT Securities, a subsidiary of Bankers Trust New York Corp., agreed to pay $10 million in civil penalties as part of its settlement with the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The administrative charges filed against the firm were related to its over-the-counter derivatives dealings with Gibson Greetings Inc.
The regulators alleged that BT Securities' representatives gave misleading information to Gibson, which didn't have the expertise needed to value the derivatives, about the swaps that BT Seurities sold. The agencies said Gibson relied on BT Securities for information about the value of Gibson's derivatives positions to evaluate particular transactions and prepare financial statements.
Without admitting or denying any wrongdoing, BT Securities agreed to pay the penalty and to cease and desist from further wrongdoing.
The firm was also directed to hire an independent consultant to conduct a review and make recommendations concerning its over-the-counter derivatives business from January 1991 to the present. It must then adopt the independent consultant's recommendations.
Concurrently with the settlement, the SEC issued an order temporarily exempting firms from registering as broker-dealers if they limit their activities to individually negotiated cash-settled, over-the-counter options on debt securities or groups of indexes of such securities.
The SEC said it issued the temporary exemption in order to avoid any short-term dislocation of the existing over-the-counter derivatives market. That exemption expires on Sept. 30, 1995.
The SEC said its investigation in the BT Securities matter continues.
The futures trading agency said its enforcement action against BT Securities doesn't signal a determination by the agency to apply new regulatory standards to these or any other swap transactions.