Lehman will examine clients' accounts
Frank Gruttadauria has been charged with defrauding several of the bank's customers of at least $40m (£28.3m) while working as a broker for SG Cowen and then Lehman Brothers, who bought its rival's brokerage business in October 2000.
The US stockmarket watchdog, the Securities and Exchange Commission, filed fraud charges against Mr Gruttadauria in February.
Lehman Brothers and SG Cowen are examining the accounts of at least 25 clients.
"We are committing tremendous resources to getting to the bottom of this highly complex scheme," said SG Cowen spokesman Don Nathan.
"Where we can see it's appropriate to credit accounts for missing money, we're doing so," said spokesman William Ahearn.
Damages
But that may not be enough to mollify angry clients.
One client who said he was $24m out of pocket due to Mr Gruttadauria's scheme filed a lawsuit in February.
Having rejected a $2m offer from Lehman Brothers, the client, entrepreneur Samuel Glazer, sued for $500m in punitive damages, his lawyer said.
False records
Mr Gruttadauria allegedly reported inflated account values to 25 families.
He was said to have kept false records of 100 accounts which suggested to the families that their investments had ballooned to $300m, according to an FBI affidavit.
Federal authorities have said the charges against Mr Gruttadauria could be expanded.