Did Clark L. Reed Jr., former president of a brokerage unit of Synovus Financial Corp., engage in questionable trades that cost six of his customers hundreds of thousands of dollars?
The Securities and Exchange Commission has claimed that he did, in a series of legal proceedings, although the point is in dispute.
The brokerage unit, Synovus Securities Inc., and Mr. Reed have settled SEC charges stemming from the matter, neither denying nor admitting any wrongdoing. But an administrative proceeding is pending against another party to the dealings, Richard T. Taylor of Ketchum, Idaho.
Executive Denies Claim
And in an interview, G. Sanders' Griffith 3d, Synovus' executive vice president and general counsel, disputed the claim that the customers lost money.
"Customers didn't suffer," he said. "They got the best price."
Mr. Griffith declined to name the customers but said they were all "people and entities of substantial net worth" and have supported Mr. Reed and Synovus in the proceedings.
Mr. Taylor declined to comment. Mr. Reed did not return a phone call seeking comment.
Synovus Financial has $5.7 billion of assets, 32 banks in the Southeast, and a leading credit card processing company.
Mr. Griffith said the brokerage unit has 17,000 customers, four offices in Georgia, and two offices in Tennessee.
Mr. Reed founded the brokerage unit and remained as president after Synovus acquired it in 1985. He stepped down in November and was succeeded by current president Len Sexton.
The dispute centers on 153 municipal bond. trades, totaling $55 million, that the SEC says Mr. Reed brokered between customers and Mr. Taylor from 1988 to 1991.
'Riskless' Profits
The SEC has alleged that Mr. Taylor was able to turn the trades into "riskless" profits by routing most of them the same day through market makers at more attractive prices.
The SEC said the trades resulted in $800,000 of losses or lost profits for the Synovus customers, and more than $500,000 of profits for Mr. Taylor. The SEC also charged Mr. Taylor with violating securities laws by acting as a broker without ever being registered as one.
The SEC claimed that Mr. Reed and Mr. Taylor had a longstanding personal and business relationship that included joint business ventures, and a $15,000 loan from Mr. Taylor to Mr. Reed that was repaid in full.
Mr. Taylor also was said to have had a contract to supply pricing and other municipal bond information to Synovus Securities.
As part of his settlement with the SEC, Mr. Reed agreed to pay a $50,000 fine and abstain from all dealings with securities brokers, dealers, and investment companies. He can apply for reinstatement in 18 months.
Synovus Securities agreed to pay a $200,000 civil penalty and to hire a consultant to review its compliance procedures.
