By Sharon Epperson Correspondent
updated 2/18/2004 7:46:25 PM ET 2004-02-19T00:46:25

The agreement between the SEC and five New York Stock Exchange specialist firms to settle allegations of improper trading practices could eventually bring refunds to investors who claim they were cheated by traders.

The final figures are still being worked out, and this settlement must be formally approved by the entire Securities and Exchange Commission.

But as it stands now, the five specialist firms have agreed in principle to pay $155 million in restitution for allegedly profiting illegally by "front-running" or trading ahead of investors. The firms will pay another $85 million in fines.

Yet individual investors will probably be the last ones to see any money from this settlement agreement.

“In this case, step one is to make the institutional investors whose trades were impacted by the front running whole for those trades impacted,” said Carol Gilden, an attorney at Much Shelist in Chicago. “And then it will be up to the mutual funds in turn to see that the investors who were in those funds who were impacted are in some way made whole.”

Considering the number of institutional traders — such as mutual funds and state pension funds — that have been demanding recovery of lost funds, and the tens of thousands of individual investors that they represent, this $155 million dollar restitution fund may not go very far.

Still, attorneys representing some specialist firms realize this agreement could have a snowball effect.

“When the regulators come in and get a significant result as in this case, the class action suits follow directly after that,” said Alexander Bono, an attorney with Blank Rome in Philadelphia.

Calpers is one of the largest pension funds in the country and has already filed for lead plaintiff status in a class action suit against the NYSE and its specialists for "front-running" trades. The fund’s managers say this agreement definitely solidifies its civil case. Class action attorneys pursuing similar suits agree.

“It's further evidence of the practices having occurred," said Gilden, "even though the specialists will not admit or deny the allegations, it is still nonetheless one of the factors being taken into account as these other suits closer to resolution.”

And average investors may have a better chance of recovering funds from individual and class action suits. In any case, it could take a while.

Remember last year's settlement between the SEC and Wall Street firms over market analysts' conflicts of interest? Individual investors have yet to receive any money from the $400 million dollar restitution fund that resulted from that agreement.

© 2012 CNBC, Inc. All Rights Reserved


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