Nonetheless, second-tier firms often do not have the staff to handle larger clients, leaving those clients with few choices.

Unlike the largest firms, the second-tier firms are less able to borrow money and have fewer large clients that might pose conflicts of interest as outside investors.

But by Wednesday, Mr. Grasso and regulators had applied so much pressure to the second-tier firms that they gave in.

The second-tier firms, by contrast, increased their share of discards from 15 percent in 1994 to 17 percent last year.

For second-tier firms, the quandary is especially difficult given that they do not get to audit their fair share of freshly public companies.

Kokusai Securities, a second-tier firm, will close 7 of its 11 overseas offices, including the Vienna office, which opened in June.

That is, of course, good news for all those second-tier firms and all those second-tier start-ups they finance.

The artists typically start out with second-tier firms; as they become more successful, they move up to the more illustrious agents.

One industry source said yesterday, however, that a deal between Coopers and Spicer & Oppenheim, a second-tier firm, would be announced in the next few weeks.

"The second-tier firms share a lot of the challenges that D.L.J. confronted," he said.