Dingell Asks SEC to Provide Data on ‘Bad Apple’ Brokers : Securities: Hearings in Congress will focus on those who repeatedly defraud customers.

NEW YORK —  Hoping to rid the securities business of “truly bad apples,” Rep. John D. Dingell (D-Mich.), the powerful chairman of the House Committee on Energy and Commerce, has asked the Securities and Exchange Commission to produce a detailed report on stockbrokers who repeatedly defraud customers.

Dingell also requested that the SEC and the General Accounting Office report on whether the nation’s stock exchanges are doing enough to weed out “recidivist rogue brokers.”

Saying his subcommittee on oversight and investigations will hold hearings on the issue, Dingell added that he may propose legislation to eject wrongdoers from the industry. The purpose of a new law, he said, would be “to accomplish the functional equivalent of a ‘three strikes and you’re out’ policy to revoke the licenses of truly bad apples.”

In a Nov. 15 letter to SEC Chairman Arthur Levitt Jr. and the GAO, Dingell said his inquiry was sparked by an investigative series published by The Times in 1992.

The series reported that many of Wall Street’s largest and best-known brokerages knowingly employed brokers with long records of disciplinary action, customer complaints and lawsuits.

In many instances, the brokers were kept on because they were among the firms’ biggest producers of business.

The Times found that the stock exchanges and the National Assn. of Securities Dealers--which share responsibility for enforcing securities regulations at brokerage firms--were often ineffective. The stories noted that disciplinary proceedings were shrouded in secrecy and often took six years to resolve, during which the brokers remained at their desks.

Dingell said recent press reports about Prudential Securities underscored “the importance of addressing this matter promptly in order to maintain investor confidence in the securities market and the securities industry.”

Prudential agreed last month to pay at least $371 million to settle SEC charges that it defrauded hundreds of thousands of small investors through limited partnership sales in the 1980s. Prudential neither admitted nor denied the charges.