SEC v. J.P. Morgan Securities Inc., District of Columbia (Apr. 28, 2003) — Judgment

SECURITIES AND EXCHANGE COhIMISSION, 
Plaintiff, 
-against- 
J.P. MORGAN SECURITIES INC.. 
Defendant. 
Civil Action KO. 
03 Civ. 2939 (MXP) 
FINAL JUDGMENT AS TO DEFENDANT 
J.P. RIORGAN SECIJFUTIES INC. 
Plaintiff  Securities and E\chmge Comniiasion  (“Conitiiissioii”) IiLix ing tiicii :I Complaint 
in this action (”Complaint”) 
and Defendant J.1’. hlorgnn Securities Inc. (“Deteridant”) ha\ ing 
(a) entered a general appearance, (b 1 consented to the Court’s jurisdiction over I)c.tnd,irrt ancl 
the subject matter of this action. (c) consented to entrq of this FinLiI Juciyinciit \I ith>iii ,iilmitting 
or denyng the allegations of the Complaint (except as to jurisdiction). (d) \\ aii ed tlinclinFs offact 
and conclusions 
of law, and (e) I\ aived any right to appeal from this Fix1 Jucigmcnt, md the 
Commission having agreed that, on the basis of this Final Judgment. 
it ivill not institute a 
proceeding against Defendant  pursuant to Sections 
1 qb), 15B, 15C, or 19(h) of the Securities 
Exchange Act 
of 1934 (the “Exchange Act”): 
I. 
Injunctive Relief 
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that: 
A.  Defendant, Defendant’s officers, agents. servants. employees, attorneys, 
and all 
persons in active concert or participation with them who receive actual notice 
of this Final 

Judgment by personai service or othenvise are permanenriy resrraineci and enjoined from 
violating Rule 
21 10 of the Conduct Rules of NASD, Inc. ("N.4SD") and Rules 401 and 476 of 
the New York Stock Exchange. Inc. 
("NYSE"), by: (1) engaging in acts or practices that create 
or maintain inappropriate  influence by investment  banking over research anal>sts and thcrefore 
impose conflicts of interest  on research analysts, and by failing to manage these conflicts 
in an 
adequate or appropriate manner; 
(3) promising.  implicitly or explicitly. favorable research 
coverage to investment banking clients or potential c!ients; 
(3) failing to disclose or cause to be 
disclosed in offering documents or elsewhere the use of proceeds from offerings to make 
payments to other persons or entities for research coverage; or 
(4) providing a "nxranty" of 
research co\.crage in con-iunction \vith investment banking transactions. 
B. Detkndant. Iklendant's officers, agents. servants. employees. attornqx and all 
persons in active concert or participation with then1 who receive actual notice of this Final 
Judgment 
by personal senkc or otherwise are permanently restrained and c:ijoinccf fioni 
violating NASD Rule 32 10 and NI'SE Rule 472 by issuing comriiunicntioiis to thc public that 
fail to disclose the tist' ofprocerds from offerings to make payments to other persons or entities 
for research coverage. 
C. Defendant. Defendant's officers, agents, senants, employees, attorncs. and all 
persons in active concert 
or participation with them who receive actual notice of this Final 
Judgment by personal seniice or otherwise are permanently restrained and enjoined from 
violating 
NASD Rule 3010 and NYSE Rule 342 by failing to maintain  appropriate supervisory 
procedures regarding or controls over the following that  are reasonably designed 
to ensure 
compliance with securities 
laws and regulations: (1) influence by investment banking over 
research analysts; 
(2) compensation and evaluation of research analysts; (3) use of research or 
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research afialysts in coniicction u.ith thc solicitation or marketing of invcstmcnt banking 
business; 
(4) publication of research regarding a securities issuer with which Defendant has, has 
solicited, or is soliciting an investment banking relationship; and (5) payments 
by Defendant to 
other entities for the publication of research by such other entities regarding Defendant’s 
investment banking clients. 
11. 
Monetarv Sanctions 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that: 
A.  As 
a result of the violations alleged in the Complaint, Defendant shall pay a total 
amount 
of $80,000,000 (which amount includes the State Settlement Offer, as defined below, 
and is subject 
to the decision of any state securities regulator(s) not to accept the State Settlement 
Offer). This amount includes: 
1. $25,000,000. as a penalty; 
2. $25,000,000, as disgorgement of commissions and other monies: 
3. $25,000,000, to be used for the procurement of Lndependent Research, as 
described in Section VIII below and the undertakings set forth in -4ddcndum 
A hereto; and 
4. $5,000,000, to be used for investor education, as described  in Section IX 
below. 
No portion of the payments for Independent Research or investor education shall be considered 
disgorgement or restitution, and/or used for compensatory purposes. 
B. The amount of $50,000,000, which is the sum of the penalty of $25,000,000 and 
disgorgement of $25,000,000, consists of 
(1) $25,000,000 in connection with the resolution of 
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this action and related proceedings instituted by NASD and NYSE (the "Federai Payment");  and 
(2) $25,000,000 that Defendant has offered to pay in connection with the resolution of related 
proceedings by state securities regulators (which, for these purposes, shall include the District of 
Columbia and Puerto Rico) (Defendant's offer to the state securities regulators hereinafter  shall 
be called the "State Settlement Offer"). Defendant shall pay the Federal Payment of 
$25,000,000 by wire transfer into an interest bearing account with the Federal Reserve Bank of 
New York ("FRB-NY"). to be designated the 
"J.P. Morgan Securities Inc. Distribution  Fund 
Account" on the tenth business day after entry of 
this Final Judgment in accordance with 
instructions to be provided to Defendant by the FRB-NY and authorized or ordered by the Court. 
Defendant shall simultaneously transmit proof 
of its payment to the Court, the Clerk of the 
Court, and the Commission's  counsel in this action. By making this payment. Defendant 
relinquishes all legal and equitable right, title, and interest in such funds, and no part of the funds 
shall be returned 
to Defendant. These funds, together Lvith any interest and income earned 
thereon (collectively. the "Distribution Fund"). shall be held by the 
FRB-IVY until further order 
of the Court. In the event that any portion of the penalty described in Section 
1I.A. 1 above is 
remitted  for deposit into the Distribution Fund, such penalty amount shall be added 
to the 
Distribution Fund and distributed pursuant to the Fair Funds provisions in Section 
308 of the 
Sarbanes-Oxley Act of 
2002 and any further order of the Court; provided. however, that the full 
penalty amount and such portion shall still be considered a penalty for tax  and any other 
purposes.  Pending further order of the Court, in accordance with the letter dated August 
26, 
2003 from the Director of the Administrative Office of the United States Courts to the 
Commission's counsel in connection with this action, the court registry fund fee pursuant 
to 28 
U.S.C. 6 1914 for the Distribution Fund shall be four (4) percent of the income earned on the 
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Distribdoil Fund. The Oistributioii Fund shall be maiiagei: iii accoidaiice \%i-itli the terns of, aiid 
shall be distributed pursuant to, this Final Judgment and any further applicable orders of the 
court. 
C. Defendant's obligation to make the Federal Payment is not contingent or dependent in 
any way or 
part on Defendant's  payments to state securities regulators pursuant to the State 
Settlement Offer. The total amount to be paid by Defendant to state securities regulators 
pursuant to the State Settlement Offer (and the total amount of the 
sum of the penalties and 
disgorgement payable under Section 
1I.A) may be reduced due to the decision of any state 
securities regulator(s) not to accept the State Settlement Offer. 
In the event a state securities 
regulator determines not to accept Defendant's  State Settlement Offer, the total amount 
of the 
Federal Payment  shall not be affected, and shall remain at 
$25,000,000. The total amount of 
penalties paid (1) in the Federal Payment ("PFed") and (2) pursuant to that portion of the State 
Settlement Offer that 
is accepted by the state securities regulators ("PYtatec") shall at all times 
equal the total amount of disgorgement paid 
(3) in the Federal Payment ("DF~~") and (4) pursuant 
to that portion of the State Settlement Offer that is accepted by state securities regulators 
("DStateS"). Insofar 
as any amount paid to the state securities regulators pursuant to the State 
Settlement Offer is deemed a penalty, the amount of the Federal Payment  that 
is deetned a 
penalty shall be adjusted so that PFed -t Pstates = DFed + DStates. 
111. 
Uses of the Distribution Fund 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Distribution Fund 
is to be utilized 
as follows: 
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A. TO pay aiiy taxes oii incoiiie earned by the Eisii-butioii Fiiiid. The Di~iribiiiio~~ Fillid 
is intended to be a "qualified settlement fund" pursuant to Section 468B(g) of the Internal 
Revenue Code and regulations thereunder. The Distribution Fund Administrator appointed 
pursuant to Section 
IV.A below of this Final Judgment is designated the administrator of the 
Distribution Fund 
as defined in and for the purpose of Treas. Reg. 5 1.468B-2(k)(3)(i), and shall 
satisfv the administrative requirements imposed by Treas. Reg. 
Q 1.468B-2 by, e.g., (1) obtaining 
a taxpayer identification number; (2) timely filing applicable federal, state, and local tax returns 
and payng taxes reported thereon; and 
(3) satisfying any information reporting or withholding 
requirements imposed on distributions from the Distribution Fund. Defendant shall provide the 
Distribution Fund Administrator with relevant information and otherwise cooperate with the 
Distribution Fund Administrator  in fulfilling the Distribution Fund's  obligations under Treas. 
Reg. 
5 1.468B-2. 
B. To pay Eligible Distribution Fund Recipients as described in Section V of this Final 
Judgment. 
C. 
Restrictions on Use of the Distribution Fund. The Distribution Fund shall not be used 
directly or indirectly 
to pay: 
1. Defendant, its predecessors, successors, and their subsidiaries, affiliates, 
present or former officers, directors, and their employees, agents, assigns, members of their 
immediate households, and those persons in active concert or participation with them, through 
subrogation or otherwise. 
2. With respect to any investment in its own securities, any issuer of securities as 
to which the Distribution Fund Administrator determines that an investment in such issuer's 
securities would otherwise provide a basis for receipt of proceeds from the Distribution Fund 
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WlLll 1LapLL LU 3uc.11 3c.LUlIIlCJ. JCIb-II lJJUCl J 1-1 fJICULCCJJ\IIJ. JL, JCl. J. JUC)JIUIUI LLJ, ‘(LILA 
affiliates; (b) present or former officers and directors and their agents, assigns, and members of 
their immediate households; and (c) those persons 
in act1L.e concert or panicipation  with them, 
through subrogation or otherwise. 
3. Any person who has been convicted  of a crime substantially related to any act 
or practice, or the types of acts or practices.  identified in the Complaint. 
4. Any person who has been enjoined by a court or sanctioned by the 
Commission or any other regulatory authority for any act or practice, or the types 
of acts or 
practices, identified in the Complaint. 
5. Any person named as a defendant i,i a pending fecieral crirnin;il or civil 
enforcement  action for any act or practice, 
or the types of acts or practices,  identiticd In the 
Complaint. 
6. Any judgment or award of punitive or Iion- compensator^ damages. 
7. Any adniinistrative fees. costs or expenses related to the Distribu!ion  Fund 
Plan described in this Final Judgment. other than the fee equal 
to four (3) perccnt of’tjie income 
earned 
on the Distribution  Fund as described in Section 1I.B ab0i.e. 
8. Any amount denominated as attorneys’ fees, costs or disbursements. 
9. The Distribution Fund Administrator or any member of his immediate family. 
IV. 
Distribution Fu n d Ad niin is t ra t or 
IT IS FURTHER ORDERED. ADJUDGED AND DECREED that: 
A. As soon as is practicable, the Court shall appoint a Distribution Fund Administrator, 
whom the Commission 
shall recommend. Subject to the Court‘s approval. there shall be a single 
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Distribution Fund Administrator wilh respecl Lo this action and tile ui'ner actions that the 
Commission has brought against other broker-dealer 
firms relating to, among other things, 
alleged research  analyst conflicts of interest and that are identified in Addendum 
I3 attached 
hereto (the "Related Actions"). However, the Distribution Fund in this action shall be separate 
from the Distribution  Funds established in those other actions. 
The Commission may request 
that additional  actions that 
it brings against other broker-dealer tirnis or individuals relating to. 
among other things, alleged research conflicts of interest be added to the list of Related Actions. 
B. Pavment of Distribution Fund Administrator. Defendant shall pay all fees, costs. and 
expenses incurred by the Distribution Fund Administrator and approved by the Court in 
connection 
with and  incidental to the performance of his duties under this Final Judgment and 
any further applicable orders 
of the Court, including the fees, costs, and expenses of any persons 
engaged 
to assist him and  all administrative  fees, costs, and expenses related to the Distribution 
Fund  Plan described below. If the Court approves a single Distribution 
Fund Administrator for 
all the Related Actions. Defendant shall pay its proportional share of the 
p;i\mt'nts to the 
Distribution  Fund Administrator  approved by the Court for all the Related Actions. such 
proportional share being the fraction equal to the amount deposited into 
this Distribution Fund by 
Defendant divided by the total amount deposited into 
all Distribution Funds established in 
connection with the Related Actions. 
C. Responsibilities. Powers and Rights of the Distribution Fund Administrator. The 
Distribution Fund  Administrator shall: 
1. administer the Distribution  Fund Plan described below in accordance with and 
subject to the conditions and limitations imposed by the terms of this Final Judgment and any 
further applicable orders 
of the Court; 
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2. dkiri'iriite monies from the Distribution rund to Eligible Distribution Fund 
Recipients, 
as approved by the Court; 
3. file tax returns on behalf of the Distribution Fund; 
4. submit written quarterly reports to the Court and the Commission staff 
commencing three months after his appointment by the Court; in such periodic reports, the 
Distribution Fund Administrator shall provide detailed information on the progress 
of the 
implementation of the Distribution Fund Plan described below, fees and expenses incurred, and 
other matters relevant to the status of the Distribution Fund; 
5. submit on a quarterly basis requests to the Court, with copies to the 
Commission staff and Defendant, for payment by Defendant 
of his fees and expenses (including 
the fees and expenses of others retained by him as authorized by this Final Jud_gnent) incurred 
during the quarterly period; the Commission and Defendant shall have the opportunity to 
comment 
on the Distribution Fund Administrator's requests within thirty (30) days after receipt 
thereof, and the Court shall. after taking into consideration the Commission's and Defendant's 
comments, order the amount that Defendant is to pay the Distribution Fund Administrator for the 
quarterly period and, if appropriate, the disposition of such amount by the Distribution Fund 
Administrator;  Defendant shall pay such amount within thirty 
(30) days of the Court's  order 
setting such amount; and 
6. have all appropriate powers and authority to perform his duties as set forth in 
the Final Judgment including, without limitation, the following powers: 
(a) 
to retain and engage such personnel as he deems necessary, including, 
without  limitation, legal counsel. relevant experts, and other personnel 
to assist in the preparation 
or administration of the Distribution Fund Plan; and 
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(bj to delegate to such persons such duties as he deems appropriate. 
D.  The Distribution Fund Administrator, his agents, attorneys, and all persons acting on 
his behalf shall be held harmless against liabilities, claims, and demands, whether civil, 
administrative, or investigative, arising from or relating to any act or omission to act in the 
course of performing his duties, except and 
to the extent that it is found that such person acted 
criminally, or in bad faith, or with 
gross negligence, or with reckless disregard of his duties, or in 
a manner that he knew was contrary to the terms of this Final Judgment or any further applicable 
order of the Court. 
E. The Court may remove the Distribution Fund Administrator sua spoitte or, for good 
cause shown, upon application of the Commission. If the Distribution Fund Administrator 
decides 
to resign, he shall first give sixty (60) days written notice to the Commission and the 
Court of his intention.  Such resignation  shall not become effective until the Court has appointed 
a successor. If the Distribution Fund Administrator is removed by the Court, becomes 
incapacitated due to illness or death, is otherwise unable 
to serve, or resigns, the Court shall 
appoint 
a successor recommended by the Commission. 
F. The Distribution Fund Administrator is entitled to rely on all rules of law and court 
orders, and shall not be liable to anyone for his own good  faith compliance with any order, rule, 
law, judgment, 
or decree. Nor shall he be liable by virtue of his compliance with the orders of 
this Court. 
In no event shall he be liable to Defendant for his good faith compliance with his 
duties and responsibilities under this Final Judgment. 
G. The Distribution Fund Administrator  shall not  enter into any employment, consulting, 
or attorney-client relationship with Defendant or any of its present or former parents, 
subsidiaries, directors, officers, employees, 
or agents acting in their capacity as such for the 
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period of the eiigsgerient  and for a pcriod of three ycars from thc Cc?iXp!C:iGE of his engagement. 
Any firm with which the Distribution Fund Administrator 
is affiliated or of which he is a 
member and any person  engaged to assist the Distribution Fund Administrator in the 
performance of his duties under this Final Judgment or any further applicable order of the Court 
shall 
not, without the Commission’s prior written consent. enter into any employment, 
consulting, or other professional  relationship with Defendant or any of its present or former 
directors, officers, employees, or agents in their capacity as such for the period 
of the 
engagement  and for three years after the completion of the engagement. 
17. 
Distribution Fund Plan 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that: 
A. The Distribution Fund Administrator shall formulate and administer a Distribution 
Fund Plan in accordance with Sections 
V.B - V.G below. The Distribution Fund Plan is 
intended to provide  for the equitable, cost-effective distribution of funds 
to Eligible Distribution 
Fund Recipients, 
as described below. An Eligible Distribution Fund Recipient is not precluded 
from pursuing, to the extent otherwise available, any other remedy 
or recourse against 
Defendant. 
B. The Distribution  Fund Administrator shall formulate a Distribution Fund Plan that, to 
the extent practicable, allocates funds to persons who purchased equity securities of companies 
referenced in the Complaint. The Distribution Fund Plan need not provide that funds be 
allocated (i) with respect to purchases 
of equity securities of each company identified in the 
Complaint or (ii) to all purchasers of equity securities of a company identified in the Complaint. 
The Distribution Fund Plan also may recognize that purchasers 
of equity securities of companies 
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referenced in coririeciiori with uiit: kind (01 soine itiids) uf conduci by DeTeriddrit 5~101dli re:cei\ e 
all of the Distribution Fund available for distribution to Eligible Distribution Fund Recipients or 
a greater proportion than should purchasers of equity securities of companies referenced in 
connection with  another kind (or other kinds) 
of conduct by Defendant. The Distribution Fund 
Administrator shall formulate a Distribution Fund Plan that attempts to ensure an equitable (but 
not necessarily equal) distribution 
of funds and that those who are allocated funds receive 
meaningful payments from the Distribution Fund. 
C. In formulating the Distribution Fund Plan, the Distribution Fund Administrator shall 
apply the following criteria to identify Eligible Distribution Fund Recipients: 
1. The person must haye purchased the “equity securities in question” through 
Defendant during the “relevant period of purchase.”  Identification 
of the *‘equity securities in 
question” and the “relevant period of purchase” for each such equity security will be set  forth 
(solely for the purpose of administering the Distribution  Fund Plan) 
in a further order of the 
court. 
2. The person must have suffered a net loss on his equity secunties purchases in 
question. 
D. In forniulating the Distribution Fund Plan, the Distribution Fund Administrator may 
also consider the following criteria in identifjmg Eligible Distribution Fund Recipients: 
1. whether the person was a retail or institutional customer; and 
2. the proximity in time between the person’s purchase of a company’s equity 
securities and Defendant’s publication of the research  in question regarding the company (as a 
threshold matter, however, the purchase must have been made after the publication or receipt 
of 
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silcli j,- ;eaicli; assuiiiiiig ilidi +-ccs;i(j;d h& Ijseii iiiCi, iii goiizi-al, ijie s;iurtei. iliC tiiiie i,c,.i();* 
more likely the person suffered a loss as a result of conduct alleged in the Complaint). 
E. If it is not practicable to fonnulate a Distribution Fund  Plan  that allocates funds to 
persons who purchased  '*equity securities in question''  during the "relevant period of purchase" 
as described above, or if it is practicable to allocate only some of the funds in the Distribution 
Fund to such persons, the Distribution  Fund Administrator  shall apply alternative or itdditional 
criteria, as the case 
may be, or other considerations in formulating a Distribution Fund  Plan. 
Such alternative or additional criteria or other considerations shall be set forth in a further order 
or orders of the Court. 
F. If  monies remain in the Distribution  Fund after a11 distributions pursuant to a 
Distribution  Fund Plan described in Sections V.B-V.E above have been made. then such 
remaining monies shall be paid 
in accordance with a plan of residual distribution to be proposcd 
by the Distribution Fund Administrator  after consultation with Coniniission  staff md. in 
his sole 
discretion. Defendant, and approved by the Court. If a residual plan of tlistrihution is nccessarq., 
the criteria that the Distribution Fund Administrator 
shall apply in fomiulating such a plan Lvill 
be set forth in a further order or orders of the Court. 
G. As soon as is practicable, and after any consultation with experts that the Distribution 
Fund Administrator believes is necessary 
or appropriate, but in no event more than six (6) 
months after being appointed by the Court, the Distribution  Fund Administrator will provide the 
Commission staff and, in his sole discretion, Defendant for review and comment 
a Distribution 
Fund 
Plan, which shall, among other things, describe a process for (1 ) identifying and 
categorizing Eligible Distribution Fund Recipients in accordance with the considerations 
described above; 
(2) determining the amount of the Distribution Fund that each Eligible 
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Distribuiion Fund Recipieiii shall receive; ad (3) Ciibii i’vuiirig iiie Disiribuiion Fund 10 Eiigibie 
Distribution Fund Recipients. Sixty 
(60) days after the Distribution Fund Plan has been 
submitted 
to the Commission staff, the Distribution Fund Administrator  shall present the Plan, 
with any revisions that the Distribution Fund  Administrator deems appropriate. 
to the Court for 
its approval. In accordance with  the Court’s Order approving the Distribution Fund 
Plan. the 
Distribution Fund .4dministrator shall implement the Plan. 
Upon the completion of the process 
of identifying the Eligible Distribution Fund Recipients and determining the amount that each 
should recei1.e. but in no event later than nine 
(9) months from the Court‘s apprcwil of the 
Distribution  Fund Plan. the Distribution Fund Adniinistrator  shall submit 
a Distribution Fund 
Report 
to thc Commission staff and, in his sole discretion,  Defendant. The Distribution Fund 
Report  shall set forth 
( 1 ) the identities of the Eligible Distribution  Fund Recipients: (2) the 
amount of the Distribution Fund that each Eligible Distnbution Fund Recipient 
slid1 receive; and 
(3) procedures for distributing the Distnbution Fund to Eligible Distributioii Ftinti Recipients. 
Seven \ 7) daqs aftcr siibniission of the Distribution Fund Report to the Coiivnission  staff, the 
Distribution Fund Administrator shall present  the 
Report to the Court for its appro1 al. The 
Distribution Fund Administrator and/or the Commission niay apply to the Court for extension of 
any deadlines set forth above. 
in the Distribution Fund Plan, or in the Distribution Fund Report, 
and the Court may grant any such application for good cause sho\vn. 
VI. 
Stav of Proceedings Against the Distribution  Fund 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that.  for the purposes of 
implementing and effectuating the Final Judgment, and upon a finding hereby made that a stay of 
any proceedings against the Distribution Fund Administrator in his official capacity and the 
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Distribution Fund during the peridericy or thc existence of the Distribution  Fund is necessary to 
effectuate the Final Judgment, all creditors or claimants of Defendant, and other persons acting 
on behalf of such creditors, claimants, or other persons, including sheriffs, marshals, other 
officers, deputies, servants, agents, employees, and attorneys, be and the same hereby are 
restrained and enjoined during the pendency or the existence of the Distribution Fund 
from: (1) 
commencing, prosecuting, continuing, or enforcing any suit or proceeding against the 
Distribution  Fund Administrator  in his official capacity or the Distribution Fund; 
(2) using self- 
help or executing or issuing or causing the execution or issuance of any court attachment. 
subpoena, replevin, execution, or other process for the purpose 
of impounding or taking 
possession of or interfering with or creating or enforcing 
a lien upon any monies or properti, 
wheresoever situated, deposited or to be transferred  into the Distribution Fund or the Distribution 
Fund Administrator pursuant to this Final Judgment; and/or 
(3) doing any act or thing 
whatsoever to interfere with the taking control, possession, or management by the Distribution 
Fund Administrator 
of the monies or property that are or may be transferred to the'Distribution 
Fund, or in any way to interfere with or harass said Distribution  Fund Administrator, or 
to 
interfere in any manner with the exclusive jurisdiction of this Court over the Distribution Fund. 
VII. 
Duties and Obligations of Defendant 
to the Distribution Fund Administrator 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, in addition to any 
other duties and obligations described in this Final Judgment: 
A.  Defendant shall upon request provide the following non-privileged  documents, 
records, and information to the Distribution Fund Administrator: 
(1) research reports issued by 
Defendant during the relevant period  identified  in the Complaint; and 
(2) documents, records, 
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and information relating to customers‘ equity securities transactions with or lhrough Defendant, 
including but not  limited to account statements, order tickets, confirmations, and related 
documents, records and information.  Defendant shall also provide the Distribution Fund 
Administrator with such other documents, records, and information that the Court may order 
Defendant to provide upon motion by the Distribution Fund Administrator.  Defendant shall 
cooperate in arranging for interviews of Defendant’s employees to explain to the Distribution 
Fund Administrator and otherwise assist the Distribution Fund Administrator in understanding 
such documents, records, and information and the distribution of such reports. In addition, 
Defendant shall provide such other cooperation that the Court may order upon motion by the 
Distribution Fund Administrator. 
In performing his duties pursuant to this Final Judgment, the 
Distribution Fund Administrator shall not make any determination whether any conduct by 
Defendant violated federal 
or state securities laws or NASD or NYSE rules or conduct any 
inquiry for the purpose of making any such determination. 
B. Defendant shall take such actions as the Distribution Fund Adniinistrator may require 
(including. but not limited to. providing any notices 
to any of Defendant’s present or former 
customers that  the Distribution Fund Administrator deems appropriate) to ensure proper 
implementation of the Distribution Fund Plan. 
C. Defendant shall indemnify, defend, and hold harmless the Distribution Fund 
Administrator, his agents, and his attorneys from and against liabilities, claims, and demands, 
whether civil, administrative, or investigative, judgments, fines, and amounts paid in settlement, 
and costs and expenses (including attorneys’ fees), arising from or relating to any act or omission 
to act in the course of performing his duties, except and to the extent that the Court finds that 
such person acted criminally, or in bad faith, or with gross negligence, or with reckless disregard 
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of his duiies, or iri a manier that he knew was contrary to ilis kiiiis of this Filial Jildgnient 01 any 
further applicable order of the Court. 
VIII. 
Financial Obligation Regardinp Independent Research 
A. As referenced in Section II.A.3 above, Defendant shall pay a total of $25,000,000 for 
its hdependent Consultant to procure  Independent Research from the Independent Research 
Providers over the five-year period set forth in Section 
III. 1 of Addendum A hereto. This 
amount is not contingent or dependent in any way or part upon acceptance by any state securities 
regulator(s) of the State Settlement Offer. As used herein, the terms “Independent Consultant,” 
“Independent Research,“ and “Independent Research Providers” shall have the meanings set 
forth in Addendum A hereto.  Defendant will not be required to spend more than the amount set 
forth in this Section V1LI.A in order to procure Independent Research and will have no obligation 
to procure additional Independent Research if the Independent Consultant has spent the entire 
amount of Defendant’s financial obligation with regard  to Independent Research. Any money 
that 
is not spent after the five-year period set forth in Section 111.1 of Addendum A hereto will 
not be retained 
by Defendant and will be paid one-half to NASD and one-half to NYSE for use 
in their regulation and enforcement programs. 
B. Defendant shall also escrow $1,250,000 within thirty (30) days after entry of this 
Final Judgment to cover the fees and costs 
of the Independent Consultant.  This obligation is not 
contingent or dependent in any way or part upon acceptance by any state securities regulator(s) 
of the State Settlement Offer. 
In the event that such escrowed amount exceeds the fees and costs 
of the Lndependent Consultant, the excess will be returned 
to Defendant at the conclusion of the 
five-year period set forth in Section 
1rI.l of Addendum  A hereto. 
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IX. 
Investor Education 
A. Payments to the Investor Education Fund. 
1. As referenced in Section II.A.4 above, Defendant shall pay a total amount of 
$5,000,000 to be used for investor education. Defendant shall pay this amount in five equal 
installments on an annual basis.  Of this amount, $2,500.000  represents the amount  Defendant 
has offered to pay for investor education in five equal annual installments pursuant to the State 
Settlement Offer.  Defendant  shall pay the remaining amount of $2,500,000 in five equal annual 
installment payments pursuant to the terms of this Final Judgment and further applicable orders 
of the Court (the “Federal Investor Education Payments”).  Defendant’s obligation to make the 
Federal Investor Education Payments is not contingent or dependent in any way or part on 
Defendant’s inyestor education payments pursuant to the State Settlement Offer. The amount of 
Defendant’s  investor education payments pursuant to the State Settlement Offer (and the total 
amount 
of $5.000,000 payable for investor education under Section 1I.A) may be reduced due to 
the decision of any state securities regulator(s) not to accept the State Settlement Offer. In the 
event 
a state securities regulator determines not to accept Defendant’s State Settlement Offer, the 
total amount of Defendant’s Federal Investor Education Payments shall not be affected, and shall 
remain at $2,500,000 to be paid in five equal installments on an annual basis. 
2.   Defendant shall make the first such installment payment on the ninetieth (90th) 
day after the entry of this Final Judgment by the Court.  This payment shall be made by wire 
transfer into an interest bearing account with the 
FRB-NY, to be designated the “J.P. Morgan 
Securities Inc. Investor Education Fund Account”  in accordance with instructions to be provided 
to Defendant by the FRB-NY and authorized 
or ordered by the Court.  Defendant shall 
- 18 - 

siniuiiaiieuusiy irdrisiiiii yiuuf uf its p~'~iiiciii iu ilie Cuiui, iiir C'ier'h of tile Court, dnCi rhe 
Commission's counsel  in this action. By making this pal ment. Defendant relinquishes all legal 
and equitable right, title, and interest in such funds, and 
no part of the funds shall he returned to 
Defendant. Any interest and income earned on funds 
in such In\ estor Education k tinct Account 
shall be added to and become part 
of such Account. The Investor Education Fund Account shall 
be held by the FRB-h! until  further order of the Court At an) time after the cntr). of this 
Judgment, the Court 
may order that any and all funds in the J.P. Morgan Securities Inc. Investor 
Education Fund Account be transferred 
from the FIW-NY to such depositary account, to be 
known 
as the "Investor Education Fund," as the Court may direct.  Pending further order ofthe 
Court, a fee not more than ten 
(1 0) percent of the income earned on the In\ esror Education FunJ 
-4ccount shall be deducted from such Account a; the court registi? fee pursuant to 2S I1.S.C $ 
1914. Such fee shall not exceed that authorized by the Judicial Conference ofthc Iinitzd  States. 
The Investor Education Fund Account shall be administered 
in accorttancc 11 it11 the tcmms of the 
Investor Education Plan to be apprcled by this Court as provided for 111 this Fin'tl Jud~nien~ and 
any further applicable orders of the Court. 
3. Defendant  shall make subsequent installment paqnicnts m~ii~i! 11 on or before 
the month and day of the entry of this Final Judgment. Such payments shall he 
niadc to such 
account 
by such means as are specified in a further order of this Court. 
B. Purpose and Use of the Investor Education Fund Account. 
1. The J.P. Morgan Securities Inc. Investor Education Fmd Account and the 
Investor Education Fund (including all installment payments) 
shall be used to support programs 
designed to equip investors with the knowledge and 
skills necessary to make informed 
- 19- 

investiiicnt dccisiuns, aczordilig to tlie teiiiis uf this Fiii;il .liidyiici-ii. iiie irivcstur Education  Pian 
referred to below, and any further applicable orders of the 
Court. 
2. 
The J.P. Morgan Securities Inc. Investor Education Fund Account and the 
Investor Education  Fund shall be used to help establish 
a tax-exempt, non-profit grant 
administration organization (the "Investor Education  Entity") to fund worthy and cost-efficient 
programs designcd 
to equip investors with the knoivledge and skills necessary to make infornied 
investment decisions. Subject to the Court's approval. there shall 
be a single 1ni;estor Education 
Entity and 
a single Investor Education Fund with respect  to this action and the Related Actions. 
Pending tiirther order 
of the Court, the Investor  Education Fund Account in this action shall be 
separate ti-om tlic 
In\.estor Education Fund Accounts established in the Related  Actions. 
C. Stav of Proceedinrs. For the purposes of iniplenienting and effectuating this Final 
Judgment. and upon a finding hereby made that 
a stay of any proceedings  against the J.P. 
Morgan Securities Inc. In\.estor Education Fund Account. the lmvxtnr Education Fund, and the 
Investor Education Entity during the pendency or the existence 
of such Fund Account, Fund, and 
Entity 
is necessary to effcctuate this Final Judgment. all creditors or claimants of' Defcndant, and 
other persons acting on bzhrilf 
of such creditors, claimants, or other persons,  including sheriffs, 
marsh.als, other officers, deputies, servants, agents, employees, and attorneys, 
be and the same 
hereby are restrained and enjoined during 
the pendency or the existence of the J.P. Morgan 
Securities Inc. Investor Education Fund Account, the Investor Education  Fund, and the Investor 
Education Entity froni: 
( 1 ) commencing, prosecuting, continuing, or enforcing any suit or 
proceeding against such Account, Fund, or Entity; 
(2) using self-help or executiny or issuing or 
causing the execution or issuance of any court attachment, subpoena. replevin, execution, 
or 
other process for the purpose of impounding or taking possession of or interfering with or 
- 20 - 

creating or enforcing a lien iipoii my nonies or property, wheresoever situated, owned by ur in 
the possession of or to be transferred 
to such Account, Fund, or Entity pursuant to this Final 
Judgment; and/or 
(3) doing any act or thing whatsoever to interfere in any manner with the 
exclusive jurisdiction of this Court over the J.P. Morgan Securities Inc. Investor Education Fund 
Account, the Investor Education Fund, or the Investor Education Entity. 
D. Further Order of the Court.  Specific provisions concerning restrictions and 
limitations 
on use of the J.P. Morgan Securities hc. Investor Education Fund Account and the 
Investor Education Fund, payment of taxes on interest earned by such Account and Fund, the 
structure and operations of the Investor Education Entity, an Investor Education Plan, and other 
matters relating to this Section of this Judgment will be set forth in a further order of the Court. 
x. 
Standing 
JT IS FURTHER ORDERED. ADJUDGED AND DECREED that, notwithstanding any 
rule or provision 
of law, nothing herein, including in the Addenda hereto, shall be deemed to 
confer standing or right of intervention upon any persons other than the Commission, Defendant, 
and the Distribution Fund Administrator. 
XI. 
Record Retention and Non-Destruction Requirement 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, for a period of five 
years from the effective date of this Final Judgment or such shorter or longer period as the Court 
may order, Defendant, its officers, directors, agents, affiliates, servants, employees, attorneys, 
and those persons in active concert or participation with them, and each of them, are hereby 
enjoined from destroyng, mutilating, concealing, altering, 
or disposing of (a) any research 
- 21 - 

distributed by Defendant during the relevant period identified in the Cornplaint; (b) documents 
sufficient to identify all customers who bought 
or sold equity securities of the issuers as to which 
Defendant issued research during the relevant period identified in the Complaint (the 
“Transactions”), including but not limited to documents sufficient to identify the dates. amounts. 
and prices of the Transactions; (c) documents sufficient to identify which customers received 
which research distributed by Defendant  during the relevant period identified in the Complaint; 
(d) order entry information sufficient to identify whether the Transactions were solicited by 
Defendant; (e) documents sufficient to identify the publicly-traded companies for which 
Defendant sought to provide, was engaged to provide, 
or did provide investment banking 
services during the relevant period  identified in the Complaint; and 
(f) any and all written 
(including electronic) communication, including communications to and from customers and 
intra-iirm communications, relating to Defendant’s investment banking and equity research 
operations during the relevant period identified in the Complaint; 
proiickcl. hoirwvr, that 
Defendant need not retain duplicate identical copies 
of public documents filed with the 
Commission 
or any other regulatory authority. 
XJI. 
Defendant’s Consent Incorporated by Reference 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant’s Consent 
previously filed in this action is incorporated herein with the same force and effect as if fully set 
forth herein, and Defendant shall comply with all of the undertakings and agreements set forth 
therein. 
- 22 - 

XIII. 
Attached Undertakinps Incorporated by Reference 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant shall 
comply with the undertakings set forth in Addendum 
A hereto.  Such undertakings and 
Addendum 
A are incorporated herein with the same force and effect as if fully set forth herein. 
XIV. 
Definition of Defendant 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that with respect to all 
injunctive relief and all future obligations, responsibilities, undertakings, commitments, 
limitations, restrictions. events, and conditions, the terms “Defendant“ and “Defendant’s” as 
used herein shall include Defendant’s successors and assigns (which, for these purposes, shall 
include 
a successor or assign to Defendant’s investment banking and research operations, and in 
the case 
of an affiliate of Defendant. a successor or assign to Defendant‘s investment banking or 
research operations). 
XV. 
Court to Retain Jurisdiction 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court shall retain 
jurisdiction 
of this matter for the purposes of enforcing the terms of this Final Judgment. 
- 23 - 

XVI. 
Entry of Judgment Forthwith 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, there being no just 
cause for delay, the Clerk of the Court shall enter this Judgment  forthwith and without  further 
notice. 
Dated: New-York, New York 
h 
c 
L\> L.LL T. 
&* 31 ,2003 
WILLIAM H. PAULEY I11 
UNITED STATES DISTRICT JUDGE 
- 24 - 

SECURITIES AND EXCHANGE COhIMISSION, 

Plaintiff, 

-against- 

J.P. MORGAN SECURITIES INC.. 

Defendant. 

Civil Action KO. 

03 Civ. 2939 (MXP) 

FINAL JUDGMENT AS TO DEFENDANT 
J.P. RIORGAN SECIJFUTIES INC. 

Plaintiff Securities and E\chmge Comniiasion (“Conitiiissioii”) IiLix ing tiicii :I Complaint 

in this action (”Complaint”) and Defendant J.1’. hlorgnn Securities Inc. (“Deteridant”) ha\ ing 

(a) entered a general appearance, (b 1 consented to the Court’s jurisdiction over I)c.tnd,irrt ancl 

the subject matter of this action. (c )  consented to entrq of this FinLiI Juciyinciit \I i t h > i i i  ,iilmitting 

or denyng the allegations of the Complaint (except as to jurisdiction). (d)  \\ aii ed tlinclinFs offact 

and conclusions of law, and ( e )  I\ aived any right to appeal from this Fix1 Jucigmcnt, md  the 

Commission having agreed that, on the basis of this Final Judgment. i t  ivill not institute a 

proceeding against Defendant pursuant to Sections 1 q b ) ,  15B, 15C, or 19(h) of the Securities 

Exchange Act of 1934 (the “Exchange Act”): 

I. 

Injunctive Relief 

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that: 

A. Defendant, Defendant’s officers, agents. servants. employees, attorneys, and all 

persons in active concert or participation with them who receive actual notice of this Final 



Judgment by personai service or othenvise are permanenriy resrraineci and enjoined from 

violating Rule 21 10 of the Conduct Rules of NASD, Inc. ("N.4SD") and Rules 401 and 476 of 

the New York Stock Exchange. Inc. ("NYSE"), by: (1) engaging in acts or practices that create 

or maintain inappropriate influence by investment banking over research anal>sts and thcrefore 

impose conflicts of interest on research analysts, and by failing to manage these conflicts in  an 

adequate or appropriate manner; ( 3 )  promising. implicitly or explicitly. favorable research 

coverage to investment banking clients or potential c!ients; (3) failing to disclose or cause to be 

disclosed in offering documents or elsewhere the use of proceeds from offerings to make 

payments to other persons or entities for research coverage; or (4) providing a "nxranty" of 

research co\.crage in  con-iunction \vith investment banking transactions. 

B. Detkndant. Iklendant's officers, agents. servants. employees. attornqx and all 

persons in active concert or participation with then1 who receive actual notice of this Final 

Judgment by personal s e n k c  or otherwise are permanently restrained a n d  c:ijoinccf fioni 

violating NASD Rule 32 10 and NI'SE Rule 472 by issuing comriiunicntioiis t o  thc public that 

fail to disclose the tist' ofprocerds from offerings to make payments to other persons or entities 

for research coverage. 

C. Defendant. Defendant's officers, agents, senants, employees, attorncs. and all 

persons in active concert or participation with them who receive actual notice of this Final 

Judgment by personal seniice or otherwise are permanently restrained and enjoined from 

violating NASD Rule 3010 and NYSE Rule 342 by failing to maintain appropriate supervisory 

procedures regarding or controls over the following that are reasonably designed to ensure 

compliance with securities laws and regulations: (1) influence by investment banking over 

research analysts; (2) compensation and evaluation of research analysts; (3) use of research or 

- 2 -  



research afialysts in coniicction u.ith thc solicitation or marketing of invcstmcnt banking 

business; (4) publication of research regarding a securities issuer with which Defendant has, has 

solicited, or is soliciting an investment banking relationship; and (5) payments by Defendant to 

other entities for the publication of research by such other entities regarding Defendant’s 

investment banking clients. 

11. 

Monetarv Sanctions 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that: 

A. As a result of the violations alleged in the Complaint, Defendant shall pay a total 

amount of $80,000,000 (which amount includes the State Settlement Offer, as defined below, 

and is subject to the decision of any state securities regulator(s) not to accept the State Settlement 

Offer). This amount includes: 

1. $25,000,000. as a penalty; 

2. $25,000,000, as disgorgement of commissions and other monies: 

3. $25,000,000, to be used for the procurement of Lndependent Research, as 

described in Section VIII below and the undertakings set forth in -4ddcndum 

A hereto; and 

4. $5,000,000, to be used for investor education, as described in Section IX 

below. 

No portion of the payments for Independent Research or investor education shall be considered 

disgorgement or restitution, and/or used for compensatory purposes. 

B. The amount of $50,000,000, which is the sum of the penalty of $25,000,000 and 

disgorgement of $25,000,000, consists of (1) $25,000,000 in connection with the resolution of 

- 3 -  



this action and related proceedings instituted by NASD and NYSE (the "Federai Payment"); and 

(2) $25,000,000 that Defendant has offered to pay in connection with the resolution of related 

proceedings by state securities regulators (which, for these purposes, shall include the District of 

Columbia and Puerto Rico) (Defendant's offer to the state securities regulators hereinafter shall 

be called the "State Settlement Offer"). Defendant shall pay the Federal Payment of 

$25,000,000 by wire transfer into an interest bearing account with the Federal Reserve Bank of 

New York ("FRB-NY"). to be designated the "J.P. Morgan Securities Inc. Distribution Fund 

Account" on the tenth business day after entry of this Final Judgment in accordance with 

instructions to be provided to Defendant by the FRB-NY and authorized or ordered by the Court. 

Defendant shall simultaneously transmit proof of its payment to the Court, the Clerk of the 

Court, and the Commission's counsel in this action. By making this payment. Defendant 

relinquishes all legal and equitable right, title, and interest in such funds, and no part of the funds 

shall be returned to Defendant. These funds, together Lvith any interest and income earned 

thereon (collectively. the "Distribution Fund"). shall be held by the FRB-IVY until further order 

of the Court. In the event that any portion of the penalty described in Section 1I.A. 1 above is 

remitted for deposit into the Distribution Fund, such penalty amount shall be added to the 

Distribution Fund and distributed pursuant to the Fair Funds provisions in Section 308 of the 

Sarbanes-Oxley Act of 2002 and any further order of the Court; provided. however, that the full 

penalty amount and such portion shall still be considered a penalty for tax and any other 

purposes. Pending further order of the Court, in accordance with the letter dated August 26, 

2003 from the Director of the Administrative Office of the United States Courts to the 

Commission's counsel in connection with this action, the court registry fund fee pursuant to 28 

U.S.C. 6 1914 for the Distribution Fund shall be four (4) percent of the income earned on the 

- 4 -  



Distribdoil Fund. The Oistributioii Fund shall be maiiagei: iii accoidaiice \%i-itli the terns of, aiid 

shall be distributed pursuant to, this Final Judgment and any further applicable orders of the 

court. 

C. Defendant's obligation to make the Federal Payment is not contingent or dependent in 

any way or part on Defendant's payments to state securities regulators pursuant to the State 

Settlement Offer. The total amount to be paid by Defendant to state securities regulators 

pursuant to the State Settlement Offer (and the total amount of the sum of the penalties and 

disgorgement payable under Section 1I.A) may be reduced due to the decision of any state 

securities regulator(s) not to accept the State Settlement Offer. In the event a state securities 

regulator determines not to accept Defendant's State Settlement Offer, the total amount of the 

Federal Payment shall not be affected, and shall remain at $25,000,000. The total amount of 

penalties paid (1) in the Federal Payment ("PFed") and (2) pursuant to that portion of the State 

Settlement Offer that is accepted by the state securities regulators ("PYtatec") shall at all times 

equal the total amount of disgorgement paid ( 3 )  in the Federal Payment ("DF~~")  and (4) pursuant 

to that portion of the State Settlement Offer that is accepted by state securities regulators 

("DStateS"). Insofar as any amount paid to the state securities regulators pursuant to the State 

Settlement Offer is deemed a penalty, the amount of the Federal Payment that is deetned a 

penalty shall be adjusted so that PFed -t Pstates = DFed + DStates. 

111. 

Uses of the Distribution Fund 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Distribution Fund 

is to be utilized as follows: 

- 5 -  



A. TO pay aiiy taxes oii incoiiie earned by the Eisii-butioii Fiiiid. The Di~iribii i io~~ Fillid 

is intended to be a "qualified settlement fund" pursuant to Section 468B(g) of the Internal 

Revenue Code and regulations thereunder. The Distribution Fund Administrator appointed 

pursuant to Section IV.A below of this Final Judgment is designated the administrator of the 

Distribution Fund as defined in and for the purpose of Treas. Reg. 5 1.468B-2(k)(3)(i), and shall 

satisfv the administrative requirements imposed by Treas. Reg. Q 1.468B-2 by, e.g., (1) obtaining 

a taxpayer identification number; (2) timely filing applicable federal, state, and local tax returns 

and payng taxes reported thereon; and (3) satisfying any information reporting or withholding 

requirements imposed on distributions from the Distribution Fund. Defendant shall provide the 

Distribution Fund Administrator with relevant information and otherwise cooperate with the 

Distribution Fund Administrator in fulfilling the Distribution Fund's obligations under Treas. 

Reg. 5 1.468B-2. 

B. To pay Eligible Distribution Fund Recipients as described in Section V of this Final 

Judgment. 

C. Restrictions on Use of the Distribution Fund. The Distribution Fund shall not be used 

directly or indirectly to pay: 

1. Defendant, its predecessors, successors, and their subsidiaries, affiliates, 

present or former officers, directors, and their employees, agents, assigns, members of their 

immediate households, and those persons in active concert or participation with them, through 

subrogation or otherwise. 

2. With respect to any investment in its own securities, any issuer of securities as 

to which the Distribution Fund Administrator determines that an investment in such issuer's 

securities would otherwise provide a basis for receipt of proceeds from the Distribution Fund 

- 6 -  



. .  ,.-A --.:+l. +---ant +n n-,-h nnn.>*- i t -=~ r3-r-h ; C C T ~ Y T * C  (-1 ~ ~ a J o r * ~ ~ - c - n v o  rii 7 PAI-C hc. ; ,1; -4 _ , . , I  
L111U) W l L l l  1 L a p L L  L U  3uc.11 3c .LUlII lCJ .  J C I b - I I  l J J U C l  J 1 - 1  f J I C U L C C J J \ I I J .  JL, JCl .  J. J U C ) J I U I U I  LLJ, ‘(LILA 

affiliates; (b) present or former officers and directors and their agents, assigns, and members of 

their immediate households; and (c) those persons in act1L.e concert or panicipation with them, 

through subrogation or otherwise. 

3. Any person who has been convicted of a crime substantially related to any act 

or practice, or the types of acts or practices. identified in the Complaint. 

4. Any person who has been enjoined by a court or sanctioned by the 

Commission or any other regulatory authority for any act or practice, or the types of acts or 

practices, identified in the Complaint. 

5 .  Any person named as a defendant i,i a pending fecieral crirnin;il or civil 

enforcement action for any act or practice, or the types of acts or practices, identiticd In the 

Complaint. 

6. Any judgment or award of punitive or Iion- compensator^ damages. 

7. Any adniinistrative fees. costs or expenses related to the Distribu!ion Fund 

Plan described in this Final Judgment. other than the fee equal to four ( 3 )  perccnt of’tjie income 

earned on the Distribution Fund as described in Section 1I.B ab0i.e. 

8. Any amount denominated as attorneys’ fees, costs or disbursements. 

9. The Distribution Fund Administrator or any member of his immediate family. 

IV. 

Distribution Fu n d Ad niin is t ra t or 

IT IS FURTHER ORDERED. ADJUDGED AND DECREED that: 

A. As soon as is practicable, the Court shall appoint a Distribution Fund Administrator, 

whom the Commission shall recommend. Subject to the Court‘s approval. there shall be a single 

- 7 -  



Distribution Fund Administrator wilh respecl Lo this action and tile ui'ner actions that the 

Commission has brought against other broker-dealer firms relating to, among other things, 

alleged research analyst conflicts of interest and that are identified in Addendum I3 attached 

hereto (the "Related Actions"). However, the Distribution Fund in this action shall be separate 

from the Distribution Funds established in those other actions. The Commission may request 

that additional actions that it  brings against other broker-dealer tirnis or individuals relating to. 

among other things, alleged research conflicts of interest be added to the list of Related Actions. 

B. Pavment of Distribution Fund Administrator. Defendant shall pay all fees, costs. and 

expenses incurred by the Distribution Fund Administrator and approved by the Court in 

connection with and incidental to the performance of his duties under this Final Judgment and 

any further applicable orders of the Court, including the fees, costs, and expenses of any persons 

engaged to assist him and all administrative fees, costs, and expenses related to the Distribution 

Fund Plan described below. If the Court approves a single Distribution Fund Administrator for 

all the Related Actions. Defendant shall pay its proportional share of the p;i\mt'nts to the 

Distribution Fund Administrator approved by the Court for all the Related Actions. such 

proportional share being the fraction equal to the amount deposited into this Distribution Fund by 

Defendant divided by the total amount deposited into all Distribution Funds established in 

connection with the Related Actions. 

C. Responsibilities. Powers and Rights of the Distribution Fund Administrator. The 

Distribution Fund Administrator shall: 

1. administer the Distribution Fund Plan described below in accordance with and 

subject to the conditions and limitations imposed by the terms of this Final Judgment and any 

further applicable orders of the Court; 

- 8 -  



2. dkiri'iriite monies from the Distribution rund to Eligible Distribution Fund 

Recipients, as approved by the Court; 

3. file tax returns on behalf of the Distribution Fund; 

4. submit written quarterly reports to the Court and the Commission staff 

commencing three months after his appointment by the Court; in such periodic reports, the 

Distribution Fund Administrator shall provide detailed information on the progress of the 

implementation of the Distribution Fund Plan described below, fees and expenses incurred, and 

other matters relevant to the status of the Distribution Fund; 

5 .  submit on a quarterly basis requests to the Court, with copies to the 

Commission staff and Defendant, for payment by Defendant of his fees and expenses (including 

the fees and expenses of others retained by him as authorized by this Final Jud_gnent) incurred 

during the quarterly period; the Commission and Defendant shall have the opportunity to 

comment on the Distribution Fund Administrator's requests within thirty (30) days after receipt 

thereof, and the Court shall. after taking into consideration the Commission's and Defendant's 

comments, order the amount that Defendant is to pay the Distribution Fund Administrator for the 

quarterly period and, if appropriate, the disposition of such amount by the Distribution Fund 

Administrator; Defendant shall pay such amount within thirty (30) days of the Court's order 

setting such amount; and 

6. have all appropriate powers and authority to perform his duties as set forth in 

the Final Judgment including, without limitation, the following powers: 

(a) to retain and engage such personnel as he deems necessary, including, 

without limitation, legal counsel. relevant experts, and other personnel to assist in the preparation 

or administration of the Distribution Fund Plan; and 

- 9 -  



(bj  to delegate to such persons such duties as he deems appropriate. 

D. The Distribution Fund Administrator, his agents, attorneys, and all persons acting on 

his behalf shall be held harmless against liabilities, claims, and demands, whether civil, 

administrative, or investigative, arising from or relating to any act or omission to act in the 

course of performing his duties, except and to the extent that it is found that such person acted 

criminally, or in bad faith, or with gross negligence, or with reckless disregard of his duties, or in 

a manner that he knew was contrary to the terms of this Final Judgment or any further applicable 

order of the Court. 

E. The Court may remove the Distribution Fund Administrator sua spoitte or, for good 

cause shown, upon application of the Commission. If the Distribution Fund Administrator 

decides to resign, he shall first give sixty (60) days written notice to the Commission and the 

Court of his intention. Such resignation shall not become effective until the Court has appointed 

a successor. If the Distribution Fund Administrator is removed by the Court, becomes 

incapacitated due to illness or death, is otherwise unable to serve, or resigns, the Court shall 

appoint a successor recommended by the Commission. 

F. The Distribution Fund Administrator i s  entitled to rely on all rules of law and court 

orders, and shall not be liable to anyone for his own good faith compliance with any order, rule, 

law, judgment, or decree. Nor shall he be liable by virtue of his compliance with the orders of 

this Court. In no event shall he be liable to Defendant for his good faith compliance with his 

duties and responsibilities under this Final Judgment. 

G. The Distribution Fund Administrator shall not enter into any employment, consulting, 

or attorney-client relationship with Defendant or any of its present or former parents, 

subsidiaries, directors, officers, employees, or agents acting in their capacity as such for the 

- 10- 



period of the eiigsgerient and for a pcriod of three ycars from thc Cc?iXp!C:iGE of his engagement. 

Any firm with which the Distribution Fund Administrator is affiliated or of which he is a 

member and any person engaged to assist the Distribution Fund Administrator in the 

performance of his duties under this Final Judgment or any further applicable order of the Court 

shall not, without the Commission’s prior written consent. enter into any employment, 

consulting, or other professional relationship with Defendant or any of its present or former 

directors, officers, employees, or agents in their capacity as such for the period of the 

engagement and for three years after the completion of the engagement. 

17. 

Distribution Fund Plan 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that: 

A. The Distribution Fund Administrator shall formulate and administer a Distribution 

Fund Plan in accordance with Sections V.B - V.G below. The Distribution Fund Plan is 

intended to provide for the equitable, cost-effective distribution of funds to Eligible Distribution 

Fund Recipients, as described below. An Eligible Distribution Fund Recipient is not precluded 

from pursuing, to the extent otherwise available, any other remedy or recourse against 

Defendant. 

B. The Distribution Fund Administrator shall formulate a Distribution Fund Plan that, to 

the extent practicable, allocates funds to persons who purchased equity securities of companies 

referenced in the Complaint. The Distribution Fund Plan need not provide that funds be 

allocated (i) with respect to purchases of equity securities of each company identified in the 

Complaint or (ii) to all purchasers of equity securities of a company identified in the Complaint. 

The Distribution Fund Plan also may recognize that purchasers of equity securities of companies 

- 11 - 



referenced in  coririeciiori with uiit: kind (01 soine itiids) uf conduci by DeTeriddrit 5 ~ 1 0 1 d l i  re:cei\ e 

all of the Distribution Fund available for distribution to Eligible Distribution Fund Recipients or 

a greater proportion than should purchasers of equity securities of companies referenced in 

connection with another kind (or other kinds) of conduct by Defendant. The Distribution Fund 

Administrator shall formulate a Distribution Fund Plan that attempts to ensure an equitable (but 

not necessarily equal) distribution of funds and that those who are allocated funds receive 

meaningful payments from the Distribution Fund. 

C. In formulating the Distribution Fund Plan, the Distribution Fund Administrator shall 

apply the following criteria to identify Eligible Distribution Fund Recipients: 

1. The person must haye purchased the “equity securities in question” through 

Defendant during the “relevant period of purchase.” Identification of the *‘equity securities in 

question” and the “relevant period of purchase” for each such equity security will be set forth 

(solely for the purpose of administering the Distribution Fund Plan) in a further order of the 

court. 

2. The person must have suffered a net loss on his equity secunties purchases in 

question. 

D. In forniulating the Distribution Fund Plan, the Distribution Fund Administrator may 

also consider the following criteria in identifjmg Eligible Distribution Fund Recipients: 

1. whether the person was a retail or institutional customer; and 

2. the proximity in time between the person’s purchase of a company’s equity 

securities and Defendant’s publication of the research in question regarding the company (as a 

threshold matter, however, the purchase must have been made after the publication or receipt of 

- 12 - 



silcli j,- ;eaicli; assuiiiiiig ilidi +-ccs;i(j;d h& Ijseii iiiCi, iii goiizi-al, ijie s;iurtei. iliC tiiiie i,c,.i();* 

more likely the person suffered a loss as a result of conduct alleged in the Complaint). 

E. If it is not practicable to fonnulate a Distribution Fund Plan that allocates funds to 

persons who purchased '*equity securities in question'' during the "relevant period of purchase" 

as described above, or if it is practicable to allocate only some of the funds in the Distribution 

Fund to such persons, the Distribution Fund Administrator shall apply alternative or itdditional 

criteria, as the case may be, or other considerations in formulating a Distribution Fund Plan. 

Such alternative or additional criteria or other considerations shall be set forth in a further order 

or orders of the Court. 

F. If monies remain in the Distribution Fund after a11 distributions pursuant to a 

Distribution Fund Plan described in Sections V.B-V.E above have been made. then such 

remaining monies shall be paid in  accordance with a plan of residual distribution to be proposcd 

by the Distribution Fund Administrator after consultation with Coniniission staff md. in his sole 

discretion. Defendant, and approved by the Court. If a residual plan of tlistrihution is nccessarq., 

the criteria that the Distribution Fund Administrator shall apply in fomiulating such a plan Lvill 

be set forth in a further order or orders of the Court. 

G. As soon as is practicable, and after any consultation with experts that the Distribution 

Fund Administrator believes is necessary or appropriate, but in no event more than six (6) 

months after being appointed by the Court, the Distribution Fund Administrator will provide the 

Commission staff and, in his sole discretion, Defendant for review and comment a Distribution 

Fund Plan, which shall, among other things, describe a process for ( 1  ) identifying and 

categorizing Eligible Distribution Fund Recipients in accordance with the considerations 

described above; (2) determining the amount of the Distribution Fund that each Eligible 

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Distribuiion Fund Recipieiii shall receive; a d  ( 3 )  Ciibii i’vuiirig iiie Disiribuiion Fund 10 Eiigibie 

Distribution Fund Recipients. Sixty (60) days after the Distribution Fund Plan has been 

submitted to the Commission staff, the Distribution Fund Administrator shall present the Plan, 

with any revisions that the Distribution Fund Administrator deems appropriate. to the Court for 

its approval. In accordance with the Court’s Order approving the Distribution Fund Plan. the 

Distribution Fund .4dministrator shall implement the Plan. Upon the completion of the process 

of identifying the Eligible Distribution Fund Recipients and determining the amount that each 

should recei1.e. but in no event later than nine (9) months from the Court‘s apprcwil of the 

Distribution Fund Plan. the Distribution Fund Adniinistrator shall submit a Distribution Fund 

Report to thc Commission staff and, in his sole discretion, Defendant. The Distribution Fund 

Report shall set forth ( 1 ) the identities of the Eligible Distribution Fund Recipients: (2)  the 

amount of the Distribution Fund that each Eligible Distnbution Fund Recipient slid1 receive; and 

(3) procedures for distributing the Distnbution Fund to Eligible Distributioii Ftinti Recipients. 

Seven \ 7 )  daqs aftcr siibniission of the Distribution Fund Report to  the Coiivnission staff, the 

Distribution Fund Administrator shall present the Report to the Court for its appro1 al. The 

Distribution Fund Administrator and/or the Commission niay apply to the Court for extension of 

any deadlines set forth above. in  the Distribution Fund Plan, or in the Distribution Fund Report, 

and the Court may grant any such application for good cause sho\vn. 

VI. 

Stav of Proceedings Against the Distribution Fund 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that. for the purposes of 

implementing and effectuating the Final Judgment, and upon a finding hereby made that a stay of 

any proceedings against the Distribution Fund Administrator in his official capacity and the 

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Distribution Fund during the peridericy or thc existence of the Distribution Fund is necessary to 

effectuate the Final Judgment, all creditors or claimants of Defendant, and other persons acting 

on behalf of such creditors, claimants, or other persons, including sheriffs, marshals, other 

officers, deputies, servants, agents, employees, and attorneys, be and the same hereby are 

restrained and enjoined during the pendency or the existence of the Distribution Fund from: ( 1 )  

commencing, prosecuting, continuing, or enforcing any suit or proceeding against the 

Distribution Fund Administrator in his official capacity or the Distribution Fund; (2) using self- 

help or executing or issuing or causing the execution or issuance of any court attachment. 

subpoena, replevin, execution, or other process for the purpose of impounding or taking 

possession of or interfering with or creating or enforcing a lien upon any monies or properti, 

wheresoever situated, deposited or to be transferred into the Distribution Fund or the Distribution 

Fund Administrator pursuant to this Final Judgment; and/or (3) doing any act or thing 

whatsoever to interfere with the taking control, possession, or management by the Distribution 

Fund Administrator of the monies or property that are or may be transferred to the'Distribution 

Fund, or in any way to interfere with or harass said Distribution Fund Administrator, or to 

interfere in any manner with the exclusive jurisdiction of this Court over the Distribution Fund. 

VII. 

Duties and Obligations of Defendant 
to the Distribution Fund Administrator 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, in addition to any 

other duties and obligations described in this Final Judgment: 

A. Defendant shall upon request provide the following non-privileged documents, 

records, and information to the Distribution Fund Administrator: (1) research reports issued by 

Defendant during the relevant period identified in the Complaint; and (2) documents, records, 

- 1 5 -  



and information relating to customers‘ equity securities transactions with or lhrough Defendant, 

including but not limited to account statements, order tickets, confirmations, and related 

documents, records and information. Defendant shall also provide the Distribution Fund 

Administrator with such other documents, records, and information that the Court may order 

Defendant to provide upon motion by the Distribution Fund Administrator. Defendant shall 

cooperate in arranging for interviews of Defendant’s employees to explain to the Distribution 

Fund Administrator and otherwise assist the Distribution Fund Administrator in understanding 

such documents, records, and information and the distribution of such reports. In addition, 

Defendant shall provide such other cooperation that the Court may order upon motion by the 

Distribution Fund Administrator. In performing his duties pursuant to this Final Judgment, the 

Distribution Fund Administrator shall not make any determination whether any conduct by 

Defendant violated federal or state securities laws or NASD or NYSE rules or conduct any 

inquiry for the purpose of making any such determination. 

B. Defendant shall take such actions as the Distribution Fund Adniinistrator may require 

(including. but not limited to. providing any notices to any of Defendant’s present or former 

customers that the Distribution Fund Administrator deems appropriate) to ensure proper 

implementation of the Distribution Fund Plan. 

C. Defendant shall indemnify, defend, and hold harmless the Distribution Fund 

Administrator, his agents, and his attorneys from and against liabilities, claims, and demands, 

whether civil, administrative, or investigative, judgments, fines, and amounts paid in settlement, 

and costs and expenses (including attorneys’ fees), arising from or relating to any act or omission 

to act in the course of performing his duties, except and to the extent that the Court finds that 

such person acted criminally, or in bad faith, or with gross negligence, or with reckless disregard 

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of his duiies, or iri a manier that he knew was contrary to ilis kiiiis of this Filial Jildgnient 01  any 

further applicable order of the Court. 

VIII. 

Financial Obligation Regardinp Independent Research 

A. As referenced in Section II.A.3 above, Defendant shall pay a total of $25,000,000 for 

its hdependent Consultant to procure Independent Research from the Independent Research 

Providers over the five-year period set forth in Section III. 1 of Addendum A hereto. This 

amount is not contingent or dependent in any way or part upon acceptance by any state securities 

regulator(s) of the State Settlement Offer. As used herein, the terms “Independent Consultant,” 

“Independent Research,“ and “Independent Research Providers” shall have the meanings set 

forth in Addendum A hereto. Defendant will not be required to spend more than the amount set 

forth in this Section V1LI.A in order to procure Independent Research and will have no obligation 

to procure additional Independent Research if the Independent Consultant has spent the entire 

amount of Defendant’s financial obligation with regard to Independent Research. Any money 

that is not spent after the five-year period set forth in Section 111.1 of Addendum A hereto will 

not be retained by Defendant and will be paid one-half to NASD and one-half to NYSE for use 

in their regulation and enforcement programs. 

B. Defendant shall also escrow $1,250,000 within thirty (30) days after entry of this 

Final Judgment to cover the fees and costs of the Independent Consultant. This obligation is not 

contingent or dependent in any way or part upon acceptance by any state securities regulator(s) 

of the State Settlement Offer. In the event that such escrowed amount exceeds the fees and costs 

of the Lndependent Consultant, the excess will be returned to Defendant at the conclusion of the 

five-year period set forth in Section 1rI.l of Addendum A hereto. 

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IX. 

Investor Education 

A. Payments to the Investor Education Fund. 

1. As referenced in Section II.A.4 above, Defendant shall pay a total amount of 

$5,000,000 to be used for investor education. Defendant shall pay this amount in five equal 

installments on an annual basis. Of this amount, $2,500.000 represents the amount Defendant 

has offered to pay for investor education in five equal annual installments pursuant to the State 

Settlement Offer. Defendant shall pay the remaining amount of $2,500,000 in five equal annual 

installment payments pursuant to the terms of this Final Judgment and further applicable orders 

of the Court (the “Federal Investor Education Payments”). Defendant’s obligation to make the 

Federal Investor Education Payments is not contingent or dependent in any way or part on 

Defendant’s inyestor education payments pursuant to the State Settlement Offer. The amount of 

Defendant’s investor education payments pursuant to the State Settlement Offer (and the total 

amount of $5.000,000 payable for investor education under Section 1I.A) may be reduced due to 

the decision of any state securities regulator(s) not to accept the State Settlement Offer. In the 

event a state securities regulator determines not to accept Defendant’s State Settlement Offer, the 

total amount of Defendant’s Federal Investor Education Payments shall not be affected, and shall 

remain at $2,500,000 to be paid in five equal installments on an annual basis. 

2. Defendant shall make the first such installment payment on the ninetieth (90th) 

day after the entry of this Final Judgment by the Court. This payment shall be made by wire 

transfer into an interest bearing account with the FRB-NY, to be designated the “J.P. Morgan 

Securities Inc. Investor Education Fund Account” in accordance with instructions to be provided 

to Defendant by the FRB-NY and authorized or ordered by the Court. Defendant shall 

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siniuiiaiieuusiy irdrisiiiii yiuuf uf its p ~ ' ~ i i i c i i i  iu ilie Cuiui, iiir C'ier'h of tile Court, dnCi rhe 

Commission's counsel in this action. By making this pal ment. Defendant relinquishes all legal 

and equitable right, title, and interest in such funds, and no part of the funds shall he returned to 

Defendant. Any interest and income earned on funds i n  such In\ estor Education k tinct Account 

shall be added to and become part of such Account. The Investor Education Fund Account shall 

be held by the FRB-h! until further order of the Court At an) time after the cntr). of this 

Judgment, the Court may order that any and all funds in the J.P. Morgan Securities Inc. Investor 

Education Fund Account be transferred from the FIW-NY to such depositary account, to be 

known as the "Investor Education Fund," as the Court may direct. Pending further order ofthe 

Court, a fee not more than ten ( 1  0) percent of the income earned on the In\ esror Education FunJ 

-4ccount shall be deducted from such Account a; the court registi? fee pursuant to  2S I1.S.C $ 

1914. Such fee shall not exceed that authorized by the Judicial Conference ofthc Iinitzd States. 

The Investor Education Fund Account shall be administered in  accorttancc 11 it11 the tcmms of the 

Investor Education Plan to be apprcled by this Court as provided for 111 this Fin'tl J u d ~ n i e n ~  and 

any further applicable orders of the Court. 

3. Defendant shall make subsequent installment paqnicnts m ~ i i ~ i !  11 on or before 

the month and day of the entry of this Final Judgment. Such payments shall he niadc to such 

account by such means as are specified in a further order of this Court. 

B. Purpose and Use of the Investor Education Fund Account. 

1. The J.P. Morgan Securities Inc. Investor Education F m d  Account and the 

Investor Education Fund (including all installment payments) shall be used to support programs 

designed to equip investors with the knowledge and skills necessary to make informed 

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investiiicnt dccisiuns, aczordilig to tlie teiiiis uf this Fiii;il .liidyiici-ii. iiie irivcstur Education Pian 

referred to below, and any further applicable orders of the Court. 

2. The J.P. Morgan Securities Inc. Investor Education Fund Account and the 

Investor Education Fund shall be used to help establish a tax-exempt, non-profit grant 

administration organization (the "Investor Education Entity") to fund worthy and cost-efficient 

programs designcd to equip investors with the knoivledge and skills necessary to make infornied 

investment decisions. Subject to the Court's approval. there shall be a single 1ni;estor Education 

Entity and a single Investor Education Fund with respect to this action and the Related Actions. 

Pending tiirther order of the Court, the Investor Education Fund Account in  this action shall be 

separate ti-om tlic In\.estor Education Fund Accounts established in  the Related Actions. 

C. Stav of Proceedinrs. For the purposes of iniplenienting and effectuating this Final 

Judgment. and upon a finding hereby made that a stay of any proceedings against the J.P. 

Morgan Securities Inc. In\.estor Education Fund Account. the lmvxtnr Education Fund, and the 

Investor Education Entity during the pendency or the existence of such Fund Account, Fund, and 

Entity is necessary to effcctuate this Final Judgment. all creditors or claimants of' Defcndant, and 

other persons acting on bzhrilf of such creditors, claimants, or other persons, including sheriffs, 

marsh.als, other officers, deputies, servants, agents, employees, and attorneys, be and the same 

hereby are restrained and enjoined during the pendency or the existence of the J.P. Morgan 

Securities Inc. Investor Education Fund Account, the Investor Education Fund, and the Investor 

Education Entity froni: ( 1 ) commencing, prosecuting, continuing, or enforcing any suit or 

proceeding against such Account, Fund, or Entity; (2) using self-help or executiny or issuing or 

causing the execution or issuance of any court attachment, subpoena. replevin, execution, or 

other process for the purpose of impounding or taking possession of or interfering with or 

- 20 -creating or enforcing a lien iipoii m y  nonies or property, wheresoever situated, owned by ur in 

the possession of or to be transferred to such Account, Fund, or Entity pursuant to this Final 

Judgment; and/or (3) doing any act or thing whatsoever to interfere in any manner with the 

exclusive jurisdiction of this Court over the J.P. Morgan Securities Inc. Investor Education Fund 

Account, the Investor Education Fund, or the Investor Education Entity. 

D. Further Order of the Court. Specific provisions concerning restrictions and 

limitations on use of the J.P. Morgan Securities h c .  Investor Education Fund Account and the 

Investor Education Fund, payment of taxes on interest earned by such Account and Fund, the 

structure and operations of the Investor Education Entity, an Investor Education Plan, and other 

matters relating to this Section of this Judgment will be set forth in a further order of the Court. 

x. 

Standing 

JT IS FURTHER ORDERED. ADJUDGED AND DECREED that, notwithstanding any 

rule or provision of law, nothing herein, including in the Addenda hereto, shall be deemed to 

confer standing or right of intervention upon any persons other than the Commission, Defendant, 

and the Distribution Fund Administrator. 

XI. 

Record Retention and Non-Destruction Requirement 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, for a period of five 

years from the effective date of this Final Judgment or such shorter or longer period as the Court 

may order, Defendant, its officers, directors, agents, affiliates, servants, employees, attorneys, 

and those persons in active concert or participation with them, and each of them, are hereby 

enjoined from destroyng, mutilating, concealing, altering, or disposing of (a) any research 

- 21 - 



distributed by Defendant during the relevant period identified in the Cornplaint; (b) documents 

sufficient to identify all customers who bought or sold equity securities of the issuers as to which 

Defendant issued research during the relevant period identified in the Complaint (the 

“Transactions”), including but not limited to documents sufficient to identify the dates. amounts. 

and prices of the Transactions; (c) documents sufficient to identify which customers received 

which research distributed by Defendant during the relevant period identified in the Complaint; 

(d) order entry information sufficient to identify whether the Transactions were solicited by 

Defendant; (e) documents sufficient to identify the publicly-traded companies for which 

Defendant sought to provide, was engaged to provide, or did provide investment banking 

services during the relevant period identified in the Complaint; and ( f )  any and all written 

(including electronic) communication, including communications to and from customers and 

intra-iirm communications, relating to Defendant’s investment banking and equity research 

operations during the relevant period identified in the Complaint; proiickcl. hoirwvr, that 

Defendant need not retain duplicate identical copies of public documents filed with the 

Commission or any other regulatory authority. 

XJI. 

Defendant’s Consent Incorporated by Reference 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant’s Consent 

previously filed in this action is incorporated herein with the same force and effect as if fully set 

forth herein, and Defendant shall comply with all of the undertakings and agreements set forth 

therein. 

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XIII. 

Attached Undertakinps Incorporated by Reference 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant shall 

comply with the undertakings set forth in Addendum A hereto. Such undertakings and 

Addendum A are incorporated herein with the same force and effect as if fully set forth herein. 

XIV. 

Definition of Defendant 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that with respect to all 

injunctive relief and all future obligations, responsibilities, undertakings, commitments, 

limitations, restrictions. events, and conditions, the terms “Defendant“ and “Defendant’s” as 

used herein shall include Defendant’s successors and assigns (which, for these purposes, shall 

include a successor or assign to Defendant’s investment banking and research operations, and in 

the case of an affiliate of Defendant. a successor or assign to Defendant‘s investment banking or 

research operations). 

XV. 

Court to Retain Jurisdiction 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court shall retain 

jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment. 

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XVI. 

Entry of Judgment Forthwith 

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, there being no just 

cause for delay, the Clerk of the Court shall enter this Judgment forthwith and without further 

notice. 

Dated: New-York, New York 

h 
c 

L\> L.LL T. 
&* 31 ,2003 

WILLIAM H. PAULEY I11 
UNITED STATES DISTRICT JUDGE 

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