Illinois securities regulators reportedly are investigating the cash-management practices of E.F. Hutton & Co., the Wall Street firm that was convicted last May on 2,000 counts of mail and wire fraud.
Francesca Marciniak, director of the Illinois Securities Department of the secretary of state`s office, could not be reached immediately for comment on the report. But the state was said to have begun its investigation shortly after the announcement of Hutton`s conviction.
Illinois is one of a handful of states, including Connecticut, New York, Massachusetts and Georgia, that have launched investigations of Hutton`s cash- management activities.
The North American Securities Administrators Association, consisting of securities regulators from all 50 states, also is conducting a coordinated investigation of the firm`s dealings.
A Hutton spokesman in New York said he was not aware of an Illinois investigation. He said the firm ”is cooperating in the fullest with all state and governmental agencies.”
Hutton pleaded guilty May 2 on federal felony charges for a check overdraft scheme it operated from 1980 to 1982. The firm paid $2,750,000 in fines and legal costs to the government and set aside $8 million for restitution to banks victimized by the overdrafts.
The conviction is grounds in most states for revoking a company`s or individual`s securities registration, according to the state regulators`
group.
Hutton has 15 offices in Illinois and 2,339 registered brokers. If any abuses are exposed by the state investigation, Illinois regulators have the power to suspend or revoke Hutton`s registration to do business in the state. The Illinois investigation is said to focus on individual brokers, Hutton offices, Illinois banks and other lending institutions.
The state regulators` group has said its probe is concentrating on individuals employed by the company rather than the firm itself. The Justice Department has been criticized by some in Congress for not naming any individual in the Hutton case.
The state regulators` group will report the conclusions of its investigation at its annual meeting Sept. 29, a spokesman said. The group is working closely with the Securities and Exchange Commission, which also is investigating Hutton.
In May, the SEC granted Hutton a 180-day exemption from being barred as an investment adviser. At the end of that period, the agency will review the case.
