Frank Quattrone, who was sentenced to 18 months in prison for urging employees to destroy documents during a probe of Credit Suisse First Boston, has been permanently prohibited by the NASD from working in the securities industry.

The NASD barred Quattrone because his behavior was “egregious” and his refusal to testify in the probe “undermined the NASD’s ability to carry out its regulatory mandate,” the organization said in a statement.

Quattrone, 49, was a central figure in the Internet boom of the 1990s, operating from an office in Palo Alto, Calif., where he helped take public companies such as Amazon.com Inc. He is the highest-ranking securities executive to face prison and expulsion from the industry since ex-Drexel Burnham Lambert Inc. junk bond chief Michael Milken was sentenced to 10 years in 1990.

“It wouldn’t look good to let Quattrone back in to the industry,” said a finance professor at New York University’s Stern School of Business and a former partner at Goldman Sachs Group Inc., Roy Smith.

Quattrone didn’t testify before the NASD, formerly the National Association of Securities Dealers, citing his right to protect himself against potential self-incrimination in his criminal trial, according to the NASD’s statement.

The NASD rejected this argument, saying the right against self-incrimination applies only to government investigations.

“NASD is incorporated as a private corporation, it does not receive state or federal funding, and its Board of Governors is not composed of government officials or appointed by a government official or agency,” the NASD said.

Quattrone can appeal the decision to the Securities and Exchange Commission.

Quattrone’s attorney, Ken Hausman, said in a statement that the NASD “singles out Frank Quattrone for harsher treatment than other individuals in related cases.”

“Mr. Quattrone intends to appeal this publicity-driven decision,” the statement said.

“It’s routine for the NASD to bar people who refuse to testify in their investigations,” said a former SEC enforcement attorney, Robert Heim. “And given his felony conviction, it would be difficult for him to work in the industry.”

In his trial earlier this year, Quattrone told jurors he never meant to obstruct justice when he forwarded a colleague’s December 2000 e-mail advising CSFB employees to “clean up” their files after he learned that a federal grand jury was investigating how the firm doled out shares of companies in initial public offerings. CSFB is the securities unit of Credit Suisse Group AG, Switzerland’s second biggest bank.

Quattrone endorsed the e-mail before passing it on, noting that he’d served as a witness in a securities lawsuit. He said the experience led him to “strongly advise” CSFB employees to follow the bank’s document retention policy, which called for routine purging of some records.

His first trial last year ended in a hung jury. In his second trial, jurors found Quattrone guilty of obstruction of justice.

Quattrone also plans to appeal his conviction and must file his appeal by December 13 in the 2nd U.S. Circuit Court of Appeals. His lawyer has said he will attack many rulings by the trial judge barring him from presenting evidence at his trial.

At the peak of the Internet bubble in 2000, Quattrone was paid $120 million.

In January 2002, CSFB agreed to pay $100 million to resolve allegations of conflict of interest, including regulators’ accusations that the firm demanded kickbacks from investors to get shares in hot IPOs. The New York based securities firm fired three of Quattrone’s lieutenants after the settlements, while clearing him of wrongdoing.