 Deal Requires Brokerages to Pay Fines, Fund Research and Education April 30, 2003
"This historic agreement represents the closing of a sad 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," said Mark Davis, director of the Alaska Division of Banking, Securities and Corporations, and administrator of securities. "It's our hope that this settlement will change the way business is done on Wall Street and that as a result wary and mistrustful investors will return to the market," Davis said. The $4.1 million will be deposited into the state General Fund. 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 Association11 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 Monday, 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 Tuesday track the provisions of the December global settlement in principle. The ten firms against which enforcement actions were announced Monday are:
"Alaska is committed to the settlement negotiated by the lead states22 and unanimously recommended by the NASAA Board of Directors," Davis said. "We look forward to reviewing the documents as they are received. 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. Tuesday's announcement marks the finalization of that agreement.
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