SEC v. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, Southern District of New York (Apr. 28, 2003) — Judgment

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT 
OF NEW YORK 
SECURITIES AND EXCHANGE COMMISSION, 
Plaintiff, Civil Action 
No. 
-against- 
03 Civ. 2941 (WHP) 
MERRILL LYNCH, PIERCE, FENNER 
& SMITH INCORPORATED, 
Defendant. 
FINAL JUDGMENT AS TO DEFENDANT 
MERRILL LYNCH, PIERCE, FENNER 
& SMITH INCORPORATED 
Plaintiff Securities and Exchange Commission (”Commission”) having filed a Complaint 
in this action (“Complaint”) and Defendant Merrill, Lynch, Pierce, Fenner 
& Smith Incorporated 
(“Defendant”) having (a) entered 
a general appearance, (b) consented to the Court’s jurisdiction 
over Defendant and the subject matter 
of this action, (c) consented to entry of this Final 
Judgment without admitting or denying the allegations of the Complaint (except as to 
jurisdiction), (d) waived findings of fact and conclusions 
of law, and (e) waived any right to 
appeal from this Final Judgment; and the Commission having agreed that, on the basis 
of this 
Final Judgment, it will not institute a proceeding against Defendant pursuant 
to Sections 15(b), 
15B, 132, or  19(h) of the Securities Exchange Act of 1934 (the “Exchange Act”): 
I. 
Iniunctive 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 personal  service or otherwise are permanently restrained and enjoined from 
violating Section  15(c) of the Exchange Act and Rule 15cl-2 promulgated  thereunder 
[ 15 U.S.C. 
tj 78o(cj and 17 C.F.R. 3 240.15~1-21 by making use of the mails or any means or 
instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to 
induce the purchase or sale of, any security by means of any act, practice, or course of business 
which operates or would operate as a fraud or deceit upon any person. 
B. 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 personal service or otherwise are permanently restrained and enjoined from 
violating Rule 21 
10 of the Conduct Rules of NASD Inc. (“NASD”) 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 analysts and therefore 
impose conflicts of interest on research analysts, and by failing to manage these conflicts in an 
adequate or appropriate manner; and 
(2) publishing research reports that are contrary to the 
beliefs of its research analysts and fail to disclose that fact, 
do not provide a sound basis for 
evaluating facts, are not properly balanced, and/or contain exaggerated or unwarranted claims 
and/or opinions for which there is no reasonable basis. 
C. 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 personal service or otherwise are permanently restrained and enjoined from 
violating 
NASD Rule 22 10 and NYSE Rule 472 by issuing communications to the public that 
-2- 

are contrary to the beliefs ofits research analysts and fail to disclose that fact, do not provide a 
sound basis for evaluating facts, are not properly balanced, and/or contain exaggerated or 
unwarranted claims and/or opinions for which there is no reasonable basis. 
D. 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 personal service 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) me of research or 
research analysts in connection with the solicitation or marketing of investment banking 
business; and 
(4) publication of research regarding a securities issuer with which Defendant has, 
has solicited, or 
is soliciting an investment banking relationship. 
11. 
Monetary 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 $200,000,000. This amount includes: 
1. $100,000,000, as a penalty; 
2. $75,000,000, to be used for the procurement of Independent Research, as 
described in Section 
ID below and the undertakings set forth in Addendum A 
hereto; and 

3. $25,000.000, to be used for investor education. as described in Section N 
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 payment of the penalty of $100.000.000 is deemed satisfied by Defendant’s 
prior payment of 
$100,000,000 pursuant to its agreements with state securities regulators (which, 
for these purposes, shall include the District of Colui,ibia and Puerto Rico). 
111. 
Financial Obligation Regarding Independent Research 
A. As referenced in Section II.A.2 above, Defendant shall pay a total of $7S,OOO,OOO for 
its Independent Consultant to procure Independent Research 
from the lndependent Research 
Providers over the five-year period set forth in Section 
HI. 1 of Addendum A hereto. 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 
VII1.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 HI. 
1 of Addendum A hereto will not revert to 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. 
In the event that such 
escrowed amount exceeds the fees and costs of the Independent Consultant, the excess will be 
-4- 

returned to Defendant at the conclusion of the five-year period set forth in Section 111.1 of 
Addendum A hereto. 
IV. 
Investor Education 
A. Payments to the Investor Education Fund. 
1. As referenced in Section II.A.3 above, Defendant shall pay a total amount of 
$25,000,000 to be used for investor education.  Defendant shall pay this amount in five equal 
installments on an annual basis. 
2. Defendant shall make the first such installment payment on the ninetieth (goth) 
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 Federal Reserve 
Bank of New York (“FRB- 
NY”), to be designated the “Merrill, Lynch, Pierce, Fenner & Smith Incorporated Investor 
Education Fund Account” in accordance with instructions to be provided 
to Defendant by the 
FRJ3-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.  Any interest and income 
earned on funds in such Investor Education Fund Account shall be added to and become part of 
such Account.  The Investor Education Fund Account shall be held by the FRB-NY until further 
order of the Court. At any time after the entry of this Judgment, the Court may order that any 
and all funds in the Menill, Lynch, Pierce, Fenner 
& Smith Incorporated Investor Education 
Fund Account be transferred from the FRB-NY to such depositary account, to be known as the 
“Investor Education Fund,” 
as the Court may direct.  Pending further order of the Court, a fee not 
-5- 

more than ten (10) percent of the income earned on the Investor Education Fund Account shall 
be deducted from such Account as the court registry fee pursuant to 
28 U.S.C. 0 1914.  Such fee 
shall not exceed that authorized by the Judicial Conference of the United States. The Investor 
Education Fund Account shall be administered in accordance with the terms 
of the Investor 
Education Plan to be approved by this Court as provided for in this Final Judgment and any 
further applicable orders of the Court. 
3. Defendant shall make subsequent installment payments annually on or before 
the month and day of the entry of this Final Judgment. Such payments shall be made 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 Menill, Lynch, Pierce, Fenner & Smith Incorporated Investor Education 
Fund 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 investment decisions, according to the terms of this Final Judgment, the Investor 
Education Plan referred to below, and any further applicable orders of the Court. 
2. The Memll, Lynch, Pierce, Fenner & Smith Incorporated 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 designed to equip investors with the knowledge and skills necessary to 
make informed investment decisions.  Subject to the Court’s approval, there shall be a single 
Investor Education Entity and a single Investor Education Fund with respect to this action and 
the Related Actions.  Pending hrther order of the Court, the Investor Education Fund Account in 
-6- 

this action shall be separate from the Investor Education Fund Accounts established in the 
Related Actions. 
C. Stay of Proceedings.  For the purposes of implementing and effectuating this Final 
Judgment, and upon a finding hereby made that a stay of any proceedings against the Memll, 
Lynch, Pierce, Fenner 
& Smith Incorporated Investor Education Fund Account, the Investor 
Education Fund, and the Investor Education Entity during the pendency or the existence of such 
Fund Account, Fund, and Entity is necessary to effectuate this 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 Menill, Lynch, Pierce, Fenner 
& Smith Incorporated Investor Education Fund 
Account, the Investor Education Fund, and the Investor Education  Entity from: 
(1) commencing, 
prosecuting, continuing, or enforcing any suit or proceeding against such Account, Fund, or 
Entity; 
(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 
property, wheresoever situated, owned by or 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 
Memll, Lynch, Pierce, Fenner 
& Smith Incorporated 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 Memll, Lynch, Pierce, Fenner 
& Smith Incorporated Investor Education 
-7- 

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. 
V. 
Standing 
IT 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 and 
Defendant. 
YI. 
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 destroying, mutilating, concealing, altering, 
or disposing of (a) any research 
distributed by Defendant during the relevant period identified in the Complaint; (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; 
-8- 

(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-firm communications, relating to Defendant’s investment banking and equity research 
operations during the relevant period identified in the Complaint; 
provided, however, that 
Defendant need not retain duplicate identical copies of public documents filed with the 
Commission or any other regulatory authority. 
VII. 
Defendant’s Consent Incorporated 
bv Reference 
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Consent 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. 
VIIT. 
Attached Undertakings 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. 
IX. 
Definition 
of Defendant 
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that with respect to all 
injunctive relief and all future obligations, responsibilities, undertakings, commitments, 
-9- 

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). 
X. 
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. 
XI. 
Entry of Judgment Forthwith 
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, there being no just 
cause for delay, the Clerk 
of the Coui-t shall enter this Judgment forthwith and without further 
notice. 
Dated: New York, 
New York 
L* 3\ ,2003 
WILLIAM H. PAULEY nr 
UNITED STATES DISTRICT KJDGE 
- 10- 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE COMMISSION, 

Plaintiff, Civil Action No. 

-against- 03 Civ. 2941 (WHP) 

MERRILL LYNCH, PIERCE, FENNER 
& SMITH INCORPORATED, 

Defendant. 

FINAL JUDGMENT AS TO DEFENDANT 
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 

Plaintiff Securities and Exchange Commission (”Commission”) having filed a Complaint 

in this action (“Complaint”) and Defendant Merrill, Lynch, Pierce, Fenner & Smith Incorporated 

(“Defendant”) having (a) entered a general appearance, (b) consented to the Court’s jurisdiction 

over Defendant and the subject matter of this action, (c) consented to entry of this Final 

Judgment without admitting or denying the allegations of the Complaint (except as to 

jurisdiction), (d) waived findings of fact and conclusions of law, and (e) waived any right to 

appeal from this Final Judgment; and the Commission having agreed that, on the basis of this 

Final Judgment, it will not institute a proceeding against Defendant pursuant to Sections 15(b), 

15B, 132, or 19(h) of the Securities Exchange Act of 1934 (the “Exchange Act”): 

I. 

Iniunctive 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 personal service or otherwise are permanently restrained and enjoined from 

violating Section 15(c) of the Exchange Act and Rule 15cl-2 promulgated thereunder [ 15 U.S.C. 

tj 78o(cj and 17 C.F.R. 3 240.15~1-21 by making use of the mails or any means or 

instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to 

induce the purchase or sale of, any security by means of any act, practice, or course of business 

which operates or would operate as a fraud or deceit upon any person. 

B. 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 personal service or otherwise are permanently restrained and enjoined from 

violating Rule 21 10 of the Conduct Rules of NASD Inc. (“NASD”) 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 analysts and therefore 

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

adequate or appropriate manner; and (2) publishing research reports that are contrary to the 

beliefs of its research analysts and fail to disclose that fact, do not provide a sound basis for 

evaluating facts, are not properly balanced, and/or contain exaggerated or unwarranted claims 

and/or opinions for which there is no reasonable basis. 

C. 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 personal service or otherwise are permanently restrained and enjoined from 

violating NASD Rule 22 10 and NYSE Rule 472 by issuing communications to the public that 

- 2 -  



are contrary to the beliefs ofits research analysts and fail to disclose that fact, do not provide a 

sound basis for evaluating facts, are not properly balanced, and/or contain exaggerated or 

unwarranted claims and/or opinions for which there is no reasonable basis. 

D. 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 personal service 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) me of research or 

research analysts in connection with the solicitation or marketing of investment banking 

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

has solicited, or is soliciting an investment banking relationship. 

11. 

Monetary 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 $200,000,000. This amount includes: 

1 .  $100,000,000, as a penalty; 

2. $75,000,000, to be used for the procurement of Independent Research, as 

described in Section ID below and the undertakings set forth in Addendum A 

hereto; and 



3. $25,000.000, to be used for investor education. as described in Section N 

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 payment of the penalty of $100.000.000 is deemed satisfied by Defendant’s 

prior payment of $100,000,000 pursuant to its agreements with state securities regulators (which, 

for these purposes, shall include the District of Colui,ibia and Puerto Rico). 

111. 

Financial Obligation Regarding Independent Research 

A. As referenced in Section II.A.2 above, Defendant shall pay a total of $7S,OOO,OOO for 

its Independent Consultant to procure Independent Research from the lndependent Research 

Providers over the five-year period set forth in Section HI. 1 of Addendum A hereto. 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 VII1.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 HI. 1 of Addendum A hereto will not revert to 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. In the event that such 

escrowed amount exceeds the fees and costs of the Independent Consultant, the excess will be 

- 4 -  



returned to Defendant at the conclusion of the five-year period set forth in Section 111.1 of 

Addendum A hereto. 

IV. 

Investor Education 

A. Payments to the Investor Education Fund. 

1. As referenced in Section II.A.3 above, Defendant shall pay a total amount of 

$25,000,000 to be used for investor education. Defendant shall pay this amount in five equal 

installments on an annual basis. 

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

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 Federal Reserve Bank of New York (“FRB- 

NY”), to be designated the “Merrill, Lynch, Pierce, Fenner & Smith Incorporated Investor 

Education Fund Account” in accordance with instructions to be provided to Defendant by the 

FRJ3-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. Any interest and income 

earned on funds in such Investor Education Fund Account shall be added to and become part of 

such Account. The Investor Education Fund Account shall be held by the FRB-NY until further 

order of the Court. At any time after the entry of this Judgment, the Court may order that any 

and all funds in the Menill, Lynch, Pierce, Fenner & Smith Incorporated Investor Education 

Fund Account be transferred from the FRB-NY to such depositary account, to be known as the 

“Investor Education Fund,” as the Court may direct. Pending further order of the Court, a fee not 

- 5 -  



more than ten (10) percent of the income earned on the Investor Education Fund Account shall 

be deducted from such Account as the court registry fee pursuant to 28 U.S.C. 0 1914. Such fee 

shall not exceed that authorized by the Judicial Conference of the United States. The Investor 

Education Fund Account shall be administered in accordance with the terms of the Investor 

Education Plan to be approved by this Court as provided for in this Final Judgment and any 

further applicable orders of the Court. 

3. Defendant shall make subsequent installment payments annually on or before 

the month and day of the entry of this Final Judgment. Such payments shall be made 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 Menill, Lynch, Pierce, Fenner & Smith Incorporated Investor Education 

Fund 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 investment decisions, according to the terms of this Final Judgment, the Investor 

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

2. The Memll, Lynch, Pierce, Fenner & Smith Incorporated 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 designed to equip investors with the knowledge and skills necessary to 

make informed investment decisions. Subject to the Court’s approval, there shall be a single 

Investor Education Entity and a single Investor Education Fund with respect to this action and 

the Related Actions. Pending hrther order of the Court, the Investor Education Fund Account in 

- 6 -  



this action shall be separate from the Investor Education Fund Accounts established in the 

Related Actions. 

C. Stay of Proceedings. For the purposes of implementing and effectuating this Final 

Judgment, and upon a finding hereby made that a stay of any proceedings against the Memll, 

Lynch, Pierce, Fenner & Smith Incorporated Investor Education Fund Account, the Investor 

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

Fund Account, Fund, and Entity is necessary to effectuate this 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 Menill, Lynch, Pierce, Fenner & Smith Incorporated Investor Education Fund 

Account, the Investor Education Fund, and the Investor Education Entity from: (1) commencing, 

prosecuting, continuing, or enforcing any suit or proceeding against such Account, Fund, or 

Entity; (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 

property, wheresoever situated, owned by or 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 

Memll, Lynch, Pierce, Fenner & Smith Incorporated 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 Memll, Lynch, Pierce, Fenner & Smith Incorporated Investor Education 

- 7 -  



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. 

V. 

Standing 

IT 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 and 

Defendant. 

YI. 

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 destroying, mutilating, concealing, altering, or disposing of (a) any research 

distributed by Defendant during the relevant period identified in the Complaint; (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; 

- 8 -  



(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-firm communications, relating to Defendant’s investment banking and equity research 

operations during the relevant period identified in the Complaint; provided, however, that 

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

Commission or any other regulatory authority. 

VII. 

Defendant’s Consent Incorporated bv Reference 

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Consent 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. 

VIIT. 

Attached Undertakings 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. 

IX. 

Definition of Defendant 

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

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

- 9 -  



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). 

X. 

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. 

XI. 

Entry of Judgment Forthwith 

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

cause for delay, the Clerk of the Coui-t shall enter this Judgment forthwith and without further 

notice. 

Dated: New York, New York 
L* 3\ ,2003 

WILLIAM H. PAULEY nr 
UNITED STATES DISTRICT KJDGE 

- 10-