FIRM TO PAY $2 MILLION DISCOUNT BROKERAGE SETTLES FRAUD ALLEGATION.

Byline: Chris Sieroty Staff Writer

BEVERLY HILLS - A Beverly Hills discount brokerage firm has agreed to pay a $2 million penalty to resolve a securities fraud investigation, the U.S. Attorney's Office said Tuesday.

JB Oxford Holdings Inc. and its subsidiary, JB Oxford & Co., also agreed to cooperate with the government in its ongoing investigation of individuals and others associated with the brokerage firm.

The federal investigation focused on whether the company properly and accurately reported information regarding its former management and ownership in proxy filings with the Securities and Exchange Commission.

The probe also looked into possible securities law violations dating back to 1993 that involved individuals and other companies associated with Irvin Kott, a convicted Canadian stock promoter and former consultant for the brokerage firm, said Jeffrey B. Isaacs, assistant U.S. Attorney in Los Angeles.

In August 1997, the FBI, U.S. Postal Service and the SEC searched the company's Beverly Hills office, he said.

Nashville, Tenn.-based Third Capital Partners LLC took control of JB Oxford in May 1998 from Oeri Finance of Switzerland and replaced directors and managers associated with Kott.

The firm also terminated all business dealings with Kott and ended its clearing arrangements with several East Coast brokerages, including New York-based Monroe Parker Securities Inc. and Stratton Oakmont Inc., said Isaacs.

``The settlement closes a chapter we have tried to close since Third Capital took over the company almost two years ago,'' said Christopher L. Jarratt, JB Oxford Holdings chairman and chief executive officer.

``There is nothing negative about this settlement,'' added Jarratt. ``It gives us the opportunity to move forward with expanding our business and is in the best interest of our shareholders.''

While the settlement concludes the U.S. Attorney's investigation of JB Oxford, Isaacs said his office continues to investigate former employees and others associated with the brokerage firm.

The U.S. Attorney expects to complete the second phase of its investigation within the next six months, he said.

Meanwhile, an investigation by the SEC into alleged trading irregularities is ongoing.

``We are currently in talks with the SEC and we are cautiously optimistic that we can reach a settlement,'' said Jarratt. While the company maintains its innocence, he said the firm continues to cooperate with regulators and would turn over any information requested by investigators in a timely manner.

Joanne Bamberger, a spokeswoman with the SEC in Washington, said the agency does not discuss investigations.

Along with the monetary penalty, which is to be paid over the next three years, JB Oxford has agreed with the U.S. Attorney's Office to:

--Appoint an independent expert who will conduct a thorough audit of the company to ensure compliance with all applicable federal and state laws.

--Implement changes recommended by the independent expert after the audit is completed.

--Provide over the next three years periodic certifications that it has not been subject to any criminal or civil actions, that it has adhered to the recommendation of the independent expert and that it has had no contact with Kott or any of his associates.

If the company fails to comply with terms of the agreement, it is subject to criminal prosecution and could be required to pay more than $4 million in penalties, said Isaacs.

JB Oxford operates branches in Beverly Hills, San Gabriel, Miami and New York. It offers clients access to online trading, stock screening, portfolio tracking and market news.

Shares of JB Oxford closed Tuesday at $6.50, up 0.40625.