SEC DRAFTS PENALTY IN NASDAQ PROBE.

Byline: Rob Wells Associated Press 

The Securities and Exchange Commission has drafted a proposal that would resolve its investigation of the Nasdaq Stock Market's parent without a fine, a source said Tuesday.

The SEC is proposing that the National Association of Securities Dealers Inc. would agree to be censured but not fined for failing to enforce rules such as requiring brokers to report their Nasdaq trades on time, according to a source briefed on the report, who spoke on condition of anonymity.

The SEC's draft report also faults the NASD, which owns Nasdaq, for failing to punish brokers that fail to honor - or ``back away'' from - their published quotes to buy and sell stock, the source said.

In addition to the settlement, the SEC would issue a report that details findings from its intensive investigation, which began in November 1994. A similar document, known as a 21(a) report, was issued to detail the shortcomings of the county supervisors in Orange County earlier this year after the SEC filed its case in that investment scandal.

NASD spokesman Marc Beauchamp declined comment on the proposed settlement and report, as did William McLucas, the SEC's enforcement director.

The lack of a fine from the SEC investigation isn't surprising to some industry experts familiar with the probe. Since September, the NASD has adopted a wide ranging restructuring plan aimed at modernizing its regulation of the nation's 510,000 brokers and 5,000 firms. It has hired new regulators and increased its budget for enforcement, all of which has been welcomed by the SEC.

The development is the latest sign that the SEC is in the final stages of its investigation. Earlier this month, SEC Chairman Arthur Levitt said he expects the probe to be wrapped up by August.

The SEC's investigation came amid allegations that major Nasdaq dealers, known as market makers, engaged in a form of price fixing in the quotation of Nasdaq stock quotes.