Brokerage faces mounting financial, legal pressure.

JB Oxford Holdings Inc., the brokerage firm under investigation by securities regulators for possible mutual fund trading abuses, plans to move out of its Beverly Hills offices as regulators appear set to impose stiff fines against the company.

The JB Oxford name has been emblazoned on the 10-story building on Wilshire Boulevard for nearly a decade.

But the financial and legal pressures appear to be increasing at the small retail brokerage firm. One person familiar with the negotiations said the company faces up to $15 million in fines, which could push it into bankruptcy.

Barry Fischer, Oxford's general counsel, refused to comment on the ongoing investigations.

He said Arden Realty Inc., which owns the property, asked Oxford to move because an existing tenant needs more space. Oxford, which leases three floors and up to 30,000 square feet, is down to about 75 employees, compared with as many as 300 a few years ago.

Arden officials declined comment.

Fischer said the deal was not finalized. Oxford may relocate to a smaller office in another Arden building at the Howard Hughes Center in Westchester.

Oxford said in an April 20 filing Going: that it received a so-called Wells notice from the Securities and Exchange Commission on April 12 related to trading at its National Clearing Corp. unit. (The unit had received its own notice in November.)

A Wells notice is typically issued before an enforcement action, giving the company an opportunity to respond and potentially negotiate with regulators. According to J.B. Oxford's filing, the SEC's Los Angeles office has recommended civil and administrative proceedings against the company.

Oxford, which has not been charged with any wrongdoing, was cited last year in a civil lawsuit against Canary Capital Partners that was brought by New York Attorney General Eliot Spitzer. The company is also being investigated by the U.S. Attorney's Office for the Central District of California.

The alleged transactions, which took place between May 2002 and September 2003, involve the improper processing of mutual fund trade orders in a way that allows hedge funds and other favored customers to engage in "late trading," which is prohibited by federal and some state regulations.

Late trading involves the purchase of mutual fund shares after the 1 p.m. market close, after overseas or other after-market activity provides a view on the direction the market will take the following day.

In legitimate mutual fund transactions, purchase orders made after the market close must await the next day's close for pricing.

Oxford has been providing documents and testimony to the SEC in response to subpoenas. It has stated that it could be subject to significant sanctions and penalties, including suspension or revocation of its license as a broker-dealer.

The company has stated that "the likelihood of loss is probable."

One insider said the company is trying to salvage its retail unit by pinning the trades in question on its trading unit. Company officials also have sought to portray the late trades as the work of rogue employees who may have used some of its 10,000 retail accounts to execute trades.

In its annual report, JB Oxford said its deteriorating financial results and ongoing probes could threaten its viability as a "growing concern."

Sandra Harris, associate regional director for enforcement in the SEC's Los Angeles office, declined comment.

Though Oxford announced in a regulatory filing last month that its president and chief operating officer, Jamie Lewis, had resigned, Lewis remains on the company's payroll as a consultant and is currently in New York. "He is still involved in assisting the company in certain respects," Fischer said.

Ongoing losses

Oxford reported a loss of $2.3 million for the fourth quarter ended Dec. 31, compared with a loss of $2.5 million for the like period a year earlier. Fourth-quarter revenues were $5.9 million in 2003 versus $5.7 million in the same period for 2002.

For all of 2003, Oxford lost $6 million, after earning $10.4 million in 2002.

The stock, which closed at $2.78 on May 13, is down 20.6 percent in the past year.

Oxford is still negotiating with the U.S. Attorney's Office in California to settle a 1997 investigation into former management. The probe resulted in a $2 million fine, of which $950,000 is still owed, according to an April filing.

The 1997 federal inquiry involved a former Oxford consultant and Canadian financier named Irving Kott, who last month pleaded guilty to concealing facts from securities regulators regarding a $6.5 million loan paid to Oxford in 1994. Kott owned shares in Reynolds Kendrick Stratton, a company that later became Oxford. Kott, now 73, received five years of probation, paid a $250,000 criminal fine and another $750,000 in donations to charities.

(J.B. Oxford's current management has disavowed all ties to Kott.)

Oxford also is defending itself in an action brought last year by EBC Trust in association with the National Association of Securities Dealers for $1 million.

Christopher Jarratt, an investment banker in Memphis, Tenn., became Oxford's chairman and chief executive in 1998 after he purchased 9 percent convertible notes in the company for $2 million. Jarratt earned $918,000 in 2003. He did not return calls.