Fears about the Republic New York Corporation's liability in what prosecutors are now calling a huge fraud dragged down the company's stock for the third consecutive trading session yesterday.

Shares of Republic New York fell 1.6 percent, to close at $59, for a total decline of nearly 15 percent this month. Investors are apparently concerned that the fraud could derail or alter HSBC Holdings' planned acquisition of Republic for $72 a share.

Officials at HSBC declined to comment on the status of the deal and referred a reporter to the bank's statement on Sept. 1 announcing an internal investigation into trading losses generated by its customer, Martin A. Armstrong, chairman of Princeton Economics International Inc., which in turn controlled Cresvale International, a brokerage firm based in Hong Kong. At that time, HSBC said its offer to acquire Republic was proceeding but would be postponed until the investigation was concluded.

Republic's stock has fallen since then on investor concerns that the trading losses generated by Mr. Armstrong, estimated by prosecutors at more than $500 million, might cause HSBC to lower its bid.

Republic's securities unit, Republic New York Securities, held Mr. Armstrong's accounts in its Philadelphia office. The bank holding company has not been charged with wrongdoing in the case and is cooperating with prosecutors. But two top officials at the securities subsidiary have been suspended.

Mr. Armstrong, chairman of Princeton Economics, an investment advisory firm, surrendered to Federal authorities in Trenton on Monday on charges that he orchestrated a huge securities fraud that had bilked Japanese investors since 1997. Prosecutors say Mr. Armstrong lured $3 billion from Japanese companies into fixed-rate notes with promises of a return of at least 4 percent annually and that he lied to his clients about his returns and illegally pooled investor funds to hide trading losses. Furthermore, Mr. Armstrong never registered as an investment adviser or commodity trading advisor as required.

Of the roughly $1 billion the money manager still owes his clients in principal and promised interest, only $46 million has been located by prosecutors in Mr. Armstrong's trading accounts.

Marc Durant, the lawyer representing Mr. Armstrong, said that his client disputed the accusations and would fight the charges.

Mr. Armstrong's trading accounts were responsible for 90 percent of the futures business at Republic Securities, according to prosecutors. James Sweeney, president of Republic Securities, and William H. Rogers, president of the unit's futures division, have been suspended.

Securities lawyers say that if an employee is found to have been involved in the fraud, Republic could face a sizable financial liability. In the complaint against Mr. Armstrong unsealed Monday by Mary Jo White, the United States Attorney for Manhattan, prosecutors say that Mr. Rogers supplied Mr. Armstrong with letters on company stationery that inflated customers' accounts.

According to the authorities, Mr. Armstrong would ask Mr. Rogers for such letters and would provide the asset value he wanted. Mr. Rogers would then provide Princeton Economics with the letter and the asset value dictated by Mr. Armstrong. If the amount in the account held at Republic New York Securities was less than the figure specified by Mr. Armstrong, funds were shifted from other clients' accounts to make up the shortfall, prosecutors say.

Exactly how Mr. Armstrong lost so much money remains unclear. But a major factor was probably the collapse in the price of the dollar against the Japanese yen in the past year or so. On Aug. 11, 1998, the dollar traded at 147.32 yen; yesterday it traded at 105.93.

In 1998, Mr. Armstrong had expressed great optimism about the strength of the dollar, forecasting that it would rise to 170 yen or higher by this year. Instead, the dollar has plunged, hurting Mr. Armstrong in two ways.

First, Mr. Armstrong was almost certainly making currency bets for his customers in keeping with his optimism on the dollar. Moreover, the strong yen made his promises of 4 percent returns, payable as they were in Japanese currency, much more costly, since he had to exchange far more dollars for the yen than he would have if the dollar had remained high.

The investigation into Mr. Armstrong's activities started in May in Tokyo when the Financial Supervisory Agency, Japan's securities regulator, conducted a surprise audit of Cresvale, which has offices in Tokyo. Cresvale convinced Japanese companies of Mr. Armstrong's trading prowess, attracting billions in funds.

Kiyotaka Sasaki, the Financial Supervisory Agency official in charge of inspections of foreign financial concerns operating in Japan, said Japanese officials would be closely watching the case against Mr. Armstrong in the United States to gauge its impact on Japanese investors, who face substantial losses.

Mr. Sasaki pointed to the close cooperation between Japanese and American officials as an example of how regulators can police global financial markets. Earlier this year, the Financial Supervisory Agency's work with British regulators helped it close a derivatives unit of Credit Suisse First Boston that sold products to help Japanese corporations defer losses.

''For us, such cooperation has turned out to be very useful and effective,'' he said.