Drexel Burnham Lambert Inc. and the Securities and Exchange Commission have worked out details of a plan to settle the SEC's massive securities fraud case against the investment banker, sources familiar with the talks said Friday.

The sources said they expected a settlement would be announced soon. Discussions toward an agreement have been going on for more than two months.The sources said Drexel has persuaded the SEC not to force it to move the majority of its junk bond department to New York from Beverly Hills, Calif. As part of the agreement, Drexel will begin new compliance procedures, probably with additional staff.

If the agreement is approved, it would settle market manipulation charges against Drexel that were the subject of a civil suit filed by the SEC in September.

In that case, the SEC charged that Drexel, the head of its junk bond department Michael Milken, his brother Lowell, Florida financier Victor Posner and others conspired to illegally use insider information and commit other securities laws violations.

The settlement with the SEC is expected to exclude the Milkens, the sources said, and would require the firm to fire Michael Milken.

In December, Drexel agreed to plead guilty to six criminal felonies and pay a record $650 million for securities-laws violations linked to the insider-trading scandal.

The SEC must also approve the agreement settling criminal charges.

The agreement between Drexel and federal prosecutors requires Drexel to fire Michael Milken, deny him his 1988 bonus, and deny Lowell half of his anticipated bonus and place him on an unpaid leave of absence if he is indicted.

The Milkens have asked a New York court to reject the Drexel settlement and say it violates their constitutional rights.