WASHINGTON - Donaldson, Lufkin & Jenrette Securities Corp. announced yesterday that it will pay $1 million to settle securities fraud charges brought by hundreds of stockholders who invested in the 1986 initial public offering of Matthews & Wright Group Inc. stock.

The stockholders filed suit against Donaldson in August 1987 after the price of Matthews & Wright stock plummeted from $13 a share to roughly $3 a share. The price drop followed press reports that Matthews & Wright had conducted billions of dollars of bogus bond closings using an unlicensed shell bank in the Northern Marianas.

David Harrison, an attorney with Lowey Dannenberg Bemporad & Selinger in New York, which represented investors, said the stockholders' settlement is still subject to court approval by the U.S. District Court for the Southern District of New York. No hearing date has been set.

Donaldson's announcement comes on the heels of Tuesday's censure by the Securities and Exchange Commission of the firm in connection with the 1986 offering of 1.5 million shares of Matthews & Wright common stock, for which Donaldson Lufkin was a lead underwriter.

The SEC charged Tuesday that Donaldson was "reckless" in not knowing about the bogus bond closings by Matthews & Wright only months before the initial public offering. The closings were not described in registration documents prepared by Donaldson for the firm.

The agency said Donaldson Lufkin particularly should have known because an official then with the firm had tried unsuccessfully to pitch a variation of the deals to Donaldson in late 1985. The official was not named in the SEC complaint Tuesday, but a former Donaldson Lufkin senior vice president, Ira A. McCown Jr., was sentenced by a federal judge in June 1991 to five years probation, a $20,500 fine, and 100 hours of community service for two years in connection with bogus Matthews & Wright deals.

Shareholders, meanwhile, had charged in their lawsuit that Donaldson violated a provision of federal securities laws that protects investors in public offerings from false and misleading statements made in prospectuses.

Catherine Conroy, senior vice president for Donaldson Lufkin, said the firm had no comment on the settlement.

Mr. Harrison said the Matthews & Wright stock initially went on the market at $11 a share and rose to $13 before press reports about Matthews & Wright's troubled deals began to surface.

Yesterday's action is the second settlement of lawsuits brought by the stockholders. Matthews & Wright agreed earlier to pay stockholders $1.5 million to settle similar charges.

A third suit is pending against outside attorneys representing Matthews & Wright in the IPO. The class of stockholders who have brought the suit includes those between August 1986, when the initial public offering took place, and June 1987, after which the price of the stock fell dramatically.

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