PRESS RELEASE FOR IMMEDIATE RELEASE

Contact:           Lori Sitler

Pager:  (302)  247-1132

Date:                April 28, 2003

 

 

Delaware to Receive $4.125 Million in Wall Street Settlement

Historic Settlement Requires Brokerage Houses to pay Fines,
Fund Independent Research and Investor Education

 

            (Wilmington, DE):  Attorney General M. Jane Brady today announced that a settlement has been reached between the Attorney General’s Office Securities Division and Wall Street firms.  Delaware stands to receive $4.125 million upon final acceptance of the terms of the agreement. The settlements result from allegations of conflicts of interest at brokerage houses where analysts recommended stocks due to improper influence from their investment banking colleagues.

 

Deputy Attorney General James B. Ropp, who serves as Delaware Securities Commissioner, said, “This historic agreement represents the closing of a difficult chapter in the history of our financial markets. The industry reforms agreed upon in this settlement will provide for more objective research and stronger protections for investors.  It's our hope and expectation that this settlement will change the way business is done on Wall Street and that investors can return to the markets with confidence.”

 

The money received in the form of penalties will be applied to the Delaware Investor Protection Fund for investor education, training for Securities Unit staff and prosecution of investment fraud cases.

 

Under the terms of the settlement the firms are also required to distribute $30 million over a period of five years to the Investor Protection Trust (IPT). The money will be used to fund investor education initiatives on the

state and national levels. The IPT is an established charitable organization with experience handling settlement funds and a history of investor education successes. 

 

North American Securities Administrators Association[1] President Christine Bruenn, Securities and Exchange Commission Chairman William H. Donaldson, New York Attorney General Eliot Spitzer, NASD Chairman and CEO Robert Glauber, New York Stock Exchange Chairman and CEO Dick Grasso, and state securities regulators announced the completion of the enforcement actions at a press conference at the SEC today, implementing the global settlement in principle reached and announced by regulators last December.

 

That settlement followed joint investigations by the regulators of allegations of undue influence of investment banking interests on securities research at brokerage firms, and the enforcement actions announced today track the provisions of the December global settlement in principle.

 

The ten firms against which enforcement actions are being announced today are:  

 

·        Bear, Stearns & Co. Inc. (“Bear Stearns”)

·        Credit Suisse First Boston, LLC (“CSFB”)

·        Goldman Sachs & Co. (“Goldman”)

·        Lehman Brothers, Inc. (“Lehman”)

·        J.P. Morgan Securities, Inc. (“J.P. Morgan”)

·        Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“Merrill Lynch”)

·        Morgan Stanley & Co. Incorporated (“Morgan Stanley”)

·        Citigroup Global Markets Inc. f/k/a Salomon Smith Barney, Inc. (“SSB”)

·        UBS Warburg LLC (“UBS”)

·        U.S. Bancorp Piper Jaffray Inc. (“Piper Jaffray”)

 

Delaware is committed to and participated in the settlements negotiated by the lead states[2] which were unanimously recommended by the NASAA Board of Directors.  Documents will be reviewed by the Delaware Attorney General Securities Unit as they are received. Attorney General Jane Brady said, "We are optimistic that the review will confirm that the interests of our residents are well served by this settlement and hope to have it approved shortly."

 

In 2001 and early 2002, Congress and the SEC were examining the issue of analyst conflicts of interest. In April of 2002 The New York Attorney General's office announced an enforcement action against Merrill Lynch based on internal emails it uncovered that showed analysts were pressured to issue bullish stock recommendations to please investment banking clients. Soon afterwards, regulators from the states, industry self-regulatory organizations and the SEC formed a joint task force to investigate Wall Street's leading investment banks. In December regulators announced an agreement in principle with the firms. Today’s announcement marks the finalization of that agreement.

 

-more-

 

 

 

Payments in Global Settlement Relating to

Firm Research and Investment Banking Conflicts of Interest

 

 

Firm	Retrospective Relief * ($ millions)	Independent Research ($ millions)	Investor Education ($ millions)	Total ($ millions)
Bear Stearns	50	25	5	80
CSFB	150	50	0	200
Goldman	50	50	10	110
J.P. Morgan	50	25	5	80
Lehman	50	25	5	80
Merrill Lynch	100**	75	25	200
Morgan Stanley	50	75	0	125
Piper Jaffray	25	7.5	0	32.5
SSB	300	75	25	400
UBS	50	25	5	80
Total ($ millions)	875	432.5	80	$1,387.5

 

*  Fines and disgorgement funds.

**Payment made in prior settlement of research analyst conflicts of interest with the states securities regulators.

 

 

April 28, 2003

 

 

 

 

 

 

 

 

 

 

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