WASHINGTON -- Firms that use false or misleading statements in connection with bids in government securities auctions would face federal fraud charges and stiff civil fines under legislation introduced yesterday by Sen. Christopher Dodd, D-Conn.

The bill, sponsored by the chairman of the Senate Banking Committee's subcommittee on securities, is Capitol Hill's latest response to revelations by Salomon Brothers that it manipulated the market for Treasury securities earlier this year.

The measure would make clear that any false or misleading statements made in connection with bids for or purchases of government securities violate the antifraud provisions of the federal securities laws.

Under tough legislation passed last year, the Securities and Exchange Commission can levy hefty fines of up to $100,000 for each securities law violation by an individual and up to $500,000 for each violation by a corporation.

According to Sen. Dodd, whose subcommittee was scheduled today to begin two days of hearings on the Salomon case and broader issues facing the market, the bill will tighten oversight of traders.

Managers of government securities firms will be alerted that they have a clear responsibility to prevent wrongdoing by supervising their employees, he said, and the New York Stock Exchange and the National Association of Securities Dealers will gain more power to police the government securities market and develop examination procedures to test for compliance with the bill.

"This will greatly increase the likelihood that violations will be uncovered," said the senator, who this summer has shepherded through the Senate several provisions amending the Government Securities Act of 1986, which expires in August.

These would reauthorize the 1986 law, authorize new sales practice rules for government securities dealers, and direct the Treasury Department, the SEC, and the Federal Reserve to closely monitor the dissemination of government securities prices and report back on the need for legislation in that area.

But Sen. Dodd said yesterday that the Salomon Brothers case, which erupted after the Senate acted, has added a "new dimension" to the debate.

He said that none of the reports issued before the news of Salomon's conduct suggested that there were any problems or gaps in the regulation of the government securities auctions.

"The Salomon revelations have forced all of us -- the regulators and the Congress -- to take a long, hard look at the adequacy of existing laws, rules, and policies to prevent and detect abuses in the auction of government securities," Sen. Dodd said. "It also has forced us to take a fresh look at whether the existing auction structure provides for the issuance of government securities at the lowest possible cost to the American taxpayer."

Rep. Edward Markey, D-Mass., chairman of the House Energy and Commerce Committee's subcommittee on telecommunications and finance, is expected to propose a similar provision as part of a package of amendments he is drafting in response to the Salomon situation and the expiration of the government securities law, including a requirement for large trader reporting.

Rep. Markey said yesterday he will ask federal regulators to comment by mid-October on the legislation, which he wants Congress to enact before adjournment this year. Sen. Dodd, meanwhile, signaled he may be willing to wait until 1992 to enact some broader reforms, in response to requests by financial regulators for 90 days to study the issues. But the provisions already cleared by the Senate and his new antifraud legislation should be enacted now, he said.

In a related development, Salomon Brothers informed Rep. Markey in a letter that Paul Mozer, the firm's former government bond trader who was fired for submitting illegal bids at several Treasury auctions, earned a bonus of $4.6 million in 1990 in addition to his annual salary of $150,000. In 1989 and 1988, Mr. Mozer was paid bonuses of $3.85 million and $2.85 million.

However, Salomon said, Mr. Mozer was not paid any bonus for the auctions that are being investigated by the government. The firm also said it will not advance legal expenses to Mr. Mozer and other top executives who have resigned in connection with the Salomon scandal, including former Chairman John Gutfreund.

The firm also said it is unable at present to determine how much it earned in profits from the four Treasury auctions in which it has admitted to bidding irregularities, beginning with a Dec. 27 sale of four-year notes. Salomon said it has assigned accountants to determine how much the firm profited and will provide the information "as soon as it can developed in a reliable fashion."

The letter from Salomon was in response to a request from Rep. Markey, who asked interim Chairman Warren Buffett to provide details of the firm's bond market dealings.

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