The firm shall comply with the following undertakings:

  
Addendum A 
 
Undertakings
 
 
The firm shall comply with the following undertakings: 
 
I.   Separation of Research and Investment Banking 
 
1. Reporting Lines
.  Research and Investment Banking will be separate 
units with entirely separate reporting lines within the firm – i.e., Research 
will not report directly or indirectly to or through Investment Banking.  
For these purposes, the head of Research may report to or through a 
person or persons to whom the head of Investment Banking also reports, 
provided that such person or persons have no direct responsibility for 
Investment Banking or investment banking activities. 
 
a. As used throughout this Addendum, the term “firm” means the 
Defendant, Defendant’s successors and assigns (which, for these 
purposes, shall include a successor or assign to Defendant’s 
investment banking and research operations), and their affiliates, 
other than “exempt investment adviser affiliates.” 
 
b. As used throughout this Addendum, the term "exempt investment 
adviser affiliate" means an investment adviser affiliate (including, 
for these purposes, a separately identifiable department or division 
that is principally engaged in the provision of investment advice to 
managed accounts as governed by the Investment Advisers Act of 
1940 or investment companies under the Investment Company Act 
of 1940) having no officers (or persons performing similar 
functions) or employees in common with the firm (which, for 
purposes of this Section I.1.b, shall not include the investment 
adviser affiliate) who can influence the activities of the firm's 
Research personnel or the content of the firm's research reports; 
provided that the firm (i) maintains and enforces written policies 
and procedures reasonably designed to prevent the firm, any 
controlling persons, officers (or persons performing similar 
functions), or employees of the firm from influencing or seeking to 
influence the activities of Research personnel of, or the content of 
research reports prepared by, the investment adviser affiliate; (ii) 
obtains an annual independent assessment of the operation of such 

 
2
policies and procedures; and (iii) does not furnish to its customers 
research reports prepared by the investment adviser affiliate or 
otherwise use such investment adviser affiliate to do indirectly 
what the firm may not do directly under this Addendum. 
 
c. As used throughout this Addendum, the term “Investment 
Banking” means all firm personnel engaged principally in 
investment banking activities, including the solicitation of issuers 
and structuring of public offering and other investment banking 
transactions.  It also includes all firm personnel who are directly or 
indirectly supervised by such persons and all personnel who 
directly or indirectly supervise such persons, up to and including 
Investment Banking management. 
 
d. As used throughout this Addendum, the term “Research” means all 
firm personnel engaged principally in the preparation and/or 
publication of research reports, including firm personnel who are 
directly or indirectly supervised by such persons and those who 
directly or indirectly supervise such persons, up to and including 
Research management. 
 
e. As used throughout this Addendum, the term “research report” 
means any written (including electronic) communication that is 
furnished by the firm to investors in the U.S. and that includes an 
analysis of the common stock, any security convertible into 
common stock, or any derivative thereof, including American 
Depositary Receipts (collectively, “Securities”), of an issuer or 
issuers and provides information reasonably sufficient upon which 
to base an investment decision; provided, however, that a “research 
report” shall not include: 
 
i. the following communications, if they do not include 
(except as specified below) an analysis, recommendation or 
rating (e.g., buy/sell/hold, under perform/market 
perform/outperform, underweight/market 
weight/overweight, etc.) of individual securities or issuers: 
 
1. reports discussing broad-based indices, such as the 
Russell 2000 or S&P 500 index; 

 
3
2. reports commenting on economic, political or market 
(including trading) conditions; 
3. technical or quantitative analysis concerning the 
demand and supply for a sector, index or industry 
based on trading volume and price; 
4. reports that recommend increasing or decreasing 
holdings in particular industries or sectors or types of 
securities; and 
5. statistical summaries of multiple companies’ financial 
data and broad-based summaries or listings of 
recommendations or ratings contained in previously-
issued research reports, provided that such summaries 
or listings do not include any analysis of individual 
companies; and 
ii. the following communications, even if they include 
information reasonably sufficient upon which to base an 
investment decision or a recommendation or rating of 
individual securities or companies: 
  
1. an analysis prepared for a current or prospective 
investing customer or group of current or prospective 
investing customers by a registered salesperson or 
trader who is (or group of registered salespersons or 
traders who are) not principally engaged in the 
preparation or publication of research reports; and 
2. periodic reports, solicitations or other 
communications prepared for current or prospective  
investment company shareholders (or similar 
beneficial owners of trusts and limited partnerships) 
or discretionary investment account clients, provided 
that such communications discuss past performance or 
the basis for previously made discretionary 
investment decisions. 
 

 
4
f. As used throughout this Addendum, the term “technical research 
report” means any written (including electronic) communication 
that is furnished by the firm to investors in the U.S. and that 
includes an analysis of the Securities of an issuer or issuers, that is 
based solely on prices and trading volume and not on the issuer's 
financial information, business prospects, or contact with issuer 
management, and that provides information reasonably sufficient 
upon which to base an investment decision. 
 
g. As used throughout this Addendum, the term “quantitative 
research report” means any written (including electronic) 
communication that is furnished by the firm to investors in the 
U.S. and that includes an analysis of the Securities of an issuer or 
issuers, that relies solely on the systematic application of statistical 
or numerical techniques to publicly available data, that does not 
include a qualitative assessment of an issuer's business prospects or 
contact with issuer management, and that provides information 
reasonably sufficient upon which to base an investment decision. 
 
h. As used throughout this Addendum, the term “Institutional 
Customer” means an entity other than a natural person having at 
least $10 million invested in securities in the aggregate in its 
portfolio and/or under management. 
 
i. As used throughout this Addendum the term “Small Institutional 
Customer” means an entity other than a natural person having less 
than $10 million and more than $1 million invested in securities in 
the aggregate in its portfolio and/or under management.  
 
2.  Legal/Compliance
.  Research will have its own dedicated legal and  
compliance staff, who may be a part of the firm’s overall 
compliance/legal infrastructure. 
 
3.   Budget
.  For the firm’s first fiscal year following the entry of the Final 
Judgment in the SEC’s action against Defendant (“Final Judgment”) 
and thereafter, Research budget and allocation of Research expenses 
will be determined by the firm’s senior management (e.g., 
CEO/Chairman/management committee, other than Investment Banking 
personnel) without input from Investment Banking and without regard 
to specific revenues or results derived from Investment Banking, though 

 
5
revenues and results of the firm as a whole may be considered in 
determining Research budget and allocation of Research expenses.  On 
an annual basis thereafter, the Audit Committee of the firm’s 
holding/parent company (or comparable independent persons/group 
without management responsibilities) will review the budgeting and 
expense allocation process with respect to Research to ensure 
compliance with this requirement. 
 
4.   Physical Separation
.  Research and Investment Banking will be 
physically separated.  Such physical separation will be reasonably 
designed to prevent the intentional and unintentional flow of information 
between Research and Investment Banking.  
 
5. Compensation
.  Compensation of professional Research personnel will 
be determined exclusively by Research management and the firm’s 
senior management (but not including Investment Banking personnel) 
using the following principles: 
 
a. Investment Banking will have no input into compensation 
decisions. 
 
b. Compensation may not be based directly or indirectly on 
Investment Banking revenues or results; provided, however, that 
compensation may relate to the revenues or results of the firm as a 
whole. 
 
c. A significant portion of the compensation of anyone principally 
engaged in the preparation of research reports (as defined in this 
Addendum) that he or she is required to certify pursuant to 
Regulation AC (such person hereinafter a “lead analyst”) must be 
based on quantifiable measures of the quality and accuracy of the 
lead analyst’s research and analysis, including his or her ratings 
and price targets, if any.  In assessing quality, the firm may rely on, 
among other things, evaluations by the firm’s investing customers, 
evaluations by the firm’s sales personnel and rankings in 
independent surveys.  In assessing accuracy, the firm may use the 
actual performance of a company or its equity securities to rank its 
own lead analysts’ ratings and price targets, if any, and forecasts, if 
any, against those of other firms, as well as against benchmarks 
such as market or sector indices. 

 
6
 
d. Other factors that may be taken into consideration in determining 
lead analyst compensation include:  (i) market capitalization of, 
and the potential interest of the firm’s investing clients in research 
with respect to, the industry covered by the analyst; (ii) Research 
management’s assessment of the analyst’s overall performance of 
job duties, abilities and leadership; (iii) the analyst’s seniority and 
experience; (iv) the analyst’s productivity; and (v) the market for 
the hiring and retention of analysts. 
 
e. The criteria to be used for compensation decisions will be 
determined by Research management and the firm’s senior 
management (not including Investment Banking) and set forth in 
writing in advance. 
 
f. Research management will document the basis for each 
compensation decision made with respect to (i) anyone who, in the 
last 12 months, has been required to certify a research report (as 
defined in this Addendum) pursuant to Regulation AC; and (ii) 
anyone who is a member of Research management (except in the 
case of senior-most Research management, in which case the basis 
for each compensation decision will be documented by the firm’s 
senior management). 
   
On an annual basis, the Compensation Committee of the firm’s 
holding/parent company (or comparable independent persons/group 
without management responsibilities) will review the compensation 
process for Research personnel.  Such review will be reasonably 
designed to ensure that compensation decisions have been made in a 
manner that is consistent with these requirements. 
 
6.   Evaluations
.  Evaluations of Research personnel will not be done by, nor 
will there be input from, Investment Banking personnel. 
 
7.   Coverage
.  Investment Banking will have no input into company-specific  
coverage decisions (i.e., whether or not to initiate or terminate coverage 
of a particular company in research reports furnished by the firm), and 
investment banking revenues or potential revenues will not be taken into 
account in making company-specific coverage decisions; provided, 
however, that this requirement does not apply to category-by-category 

 
7
coverage decisions (e.g., a given industry sector, all issuers underwritten 
by the firm, companies meeting a certain market cap threshold). 
 
8. Termination of Coverage
.  When a decision is made to terminate 
coverage of a particular company in the firm’s research reports (whether 
as a result of a company-specific or category-by-category decision), the 
firm will make available a final research report on the company using the 
means of dissemination equivalent to those it ordinarily uses; provided, 
however, that no final report is required for any company as to which the 
firm’s prior coverage has been limited to quantitative or technical 
research reports.  Such report will be comparable to prior reports, unless 
it is impracticable for the firm to produce a comparable report (e.g., if the 
analyst covering the company and/or sector has left the firm).  In any 
event, the final research report must disclose:  the firm’s termination of 
coverage; and the rationale for the decision to terminate coverage. 
 
9. Prohibition on Soliciting Investment Banking Business
.  Research is 
prohibited from participating in efforts to solicit investment banking 
business.  Accordingly, Research may not, among other things, 
participate in any “pitches” for investment banking business to 
prospective investment banking clients, or have other communications 
with companies for the purpose of soliciting investment banking 
business. 
 
10. Firewalls Between Research and Investment Banking
.  So as to reduce 
further the potential for conflicts of interest or the appearance of conflicts 
of interest, the firm must create and enforce firewalls between Research 
and Investment Banking reasonably designed to prohibit all 
communications between the two except as expressly described below: 
 
 
a. Investment Banking personnel may seek, through Research 
management (or an appropriate designee with comparable 
management or control responsibilities (“Designee”)) or in the 
presence of internal legal or compliance staff, the views of Research 
personnel about the merits of a proposed transaction, a potential 
candidate for a transaction, or market or industry trends, conditions or 
developments.  Research personnel may respond to such inquiries on 
these subjects through Research management or its Designee or in the 
presence of internal legal or compliance staff.  In addition, Research 
personnel, through Research management or its Designee or in the 

 
8
presence of internal legal or compliance staff, may initiate 
communications with Investment Banking personnel relating to 
market or industry trends, conditions or developments, provided that 
such communications are consistent in nature with the types of 
communications that an analyst might have with investing customers.  
Any communications between Research and Investment Banking 
personnel must not be made for the purpose of having Research 
personnel identify specific potential investment banking transactions. 
 
b. In response to a request by a commitment or similar committee or 
subgroup thereof, Research personnel may communicate their views 
about a proposed transaction or potential candidate for a transaction to 
the committee or subgroup thereof in connection with the review of 
such transaction or candidate by the committee.  Investment Banking 
personnel working on the proposed transaction may participate with 
the Research personnel in these discussions with such committee or 
subgroup.  However, the Research personnel also must have an 
opportunity to express their views to the committee or subgroup 
outside the presence of such Investment Banking personnel. 
 
c. Research personnel may assist the firm in confirming the adequacy of 
disclosure in offering or other disclosure documents for a transaction 
based on the analysts’ communications with the company and other 
vetting conducted outside the presence of Investment Banking 
personnel, but to the extent communicated to Investment Banking 
personnel, such communication shall only be made in the presence of 
underwriters’ or other counsel on the transaction or internal legal or 
compliance staff. 
 
d.  After the firm receives an investment banking mandate, or in 
connection with a block bid or similar transaction, Research personnel 
may  
   
(i)  Communicate their views on the pricing and structuring of 
the transaction to personnel in the firm’s equity capital 
markets group, which group’s principal job responsibility is 
the pricing and structuring of transactions;   
 

 
9
(ii) Provide to personnel in the firm’s equity capital markets 
group information obtained from investing customers 
relevant to the pricing and structuring of the transaction;  
 
(iii) Participate with the equity capital markets group, or 
independently, in efforts to educate the firm’s sales force 
regarding the transaction, including assisting in the 
preparation of internal-use memoranda (including 
presentations in electronic format) and communicating with 
the firm’s sales force, provided that Research personnel may 
not appear jointly with management of the issuer or 
Investment Banking personnel other than members of the 
equity capital markets group in such communications with 
the firm’s sales force, and provided that the following 
conditions are satisfied: 
  
1) Such oral communications by Research personnel with 
the firm’s sales force personnel regarding the transaction 
in which a recommendation or view, whether or not 
labeled as such, is expressed by such Research personnel 
regarding the transaction must have a reasonable basis; 
2) Such oral communications to a group of ten or more of 
the firm’s sales force must be “fair and balanced”, as 
such phrase is generally understood under NASD Rule 
2210(d)(1) and after taking into consideration the overall 
context in which such communications are made 
(hereinafter referred to as the “fair and balanced 
standard”).  In addition, all such oral communications to 
a group of ten or more of the firm’s sales force must be 
made in the presence of internal legal or compliance 
personnel;  
3) All internal-use memoranda (or portions thereof) 
regarding such transaction that are identified as being the 
views of Research personnel (such memoranda or 
portions thereof hereinafter referred to as “internal 
Research memoranda”) must comply with the fair and 
balanced standard;   
4) Internal Research memoranda that are distributed to a 
group of ten or more of the firm’s sales force must be 

 
10
reviewed in advance by internal legal or compliance 
personnel;  
5) A written log of all oral communications described in (2) 
above must be maintained; and 
6) All written logs and all internal Research memoranda 
described in (4) above must be retained for the period 
required by Rule 17a-4(b)(4). 
 
e.  Research personnel may attend or participate in a widely-attended 
conference attended by Investment Banking personnel or in which 
Investment Banking personnel participate, provided that the Research 
personnel do not participate in activities otherwise prohibited herein. 
  
f.   Research and Investment Banking personnel may attend or participate 
in widely-attended firm or regional meetings at which matters of general 
firm interest are discussed.  Research management and Investment 
Banking management may attend meetings or sit on firm management, 
risk or similar committees at which general business and plans (including 
those of Investment Banking and Research) and other matters of general 
firm interest are discussed.  Research and Investment Banking personnel 
may communicate with each other with respect to legal or compliance 
issues, provided that internal legal or compliance staff is present.  
 
g.  Communications between Research and Investment Banking 
personnel that are not related to investment banking or research activities 
may take place without restriction. 
 
11. Additional Restrictions on Activities By Research and Investment 
Banking Personnel.    
 
a. Research personnel are prohibited from participating in company- or 
Investment Banking-sponsored road shows related to a public offering 
or other investment banking transaction. 
 
b. Investment Banking personnel are prohibited from directing Research 
personnel to engage in marketing or selling efforts to investors with 
respect to an investment banking transaction. 
 
c. After the firm receives an investment banking mandate relating to a 
public offering of securities, Research personnel may communicate 

 
11
with investors regarding such offering provided that Research 
personnel may not appear jointly with management of the issuer or 
Investment Banking personnel in such communications, and provided 
that the following conditions are satisfied: 
 
1) Such oral communications by Research personnel with investors 
regarding the offering in which a recommendation or view, 
whether or not labeled as such, is expressed by such Research 
personnel regarding the offering must have a reasonable basis; 
2) Such oral communications to a group of ten or more investors 
regarding such offering must comply with the fair and balanced 
standard; 
3) All such oral communications to a group of ten or more investors 
must be made in the presence of internal legal or compliance 
personnel; 
4) A written log of all oral communications described in (2) above 
must be maintained; and  
5) All written logs must be retained for the period required by Rule 
17a-4(b)(4). 
 
12. Oversight
.  An oversight/monitoring committee or committees, which 
will be comprised of representatives of Research management and may 
include others (but not personnel from Investment Banking), will be 
created to: 
 
a. review (beforehand, where practicable) all changes in ratings, if any, 
and material changes in price targets, if any, contained in the firm’s 
research reports; 
 
b. conduct periodic reviews of research reports to determine whether 
changes in ratings or price targets, if any, should be considered; and 
 
c. monitor the overall quality and accuracy of the firm’s research 
reports; 
 
provided, however, that Sections I.12.a and I.12.b of this Addendum shall 
not be required with respect to quantitative or technical research reports. 
 
II. Disclosure/Transparency and Other Issues 
 

 
12
1. Disclosures
.  In addition to other disclosures required by rule, the firm 
must disclose prominently on the first page of any research report and 
any summary or listing of recommendations or ratings contained in 
previously-issued research reports, in type no smaller than the type used 
for the text of the report or summary or listing, that: 
 
a. “[Firm] does and seeks to do business with companies covered in 
its research reports.  As a result, investors should be aware that the 
firm may have a conflict of interest that could affect the objectivity 
of this report.” 
 
b. With respect to Covered Companies as to which the firm is 
required to make available Independent Research (as set forth in 
Section III below):  “Customers of [firm] in the United States can 
receive independent, third-party research on the company or 
companies covered in this report, at no cost to them, where such 
research is available.  Customers can access this independent 
research at [website address/hyperlink] or can call [toll-free 
number] to request a copy of this research.”   
 
c. “Investors should consider this report as only a single factor in 
making their investment decision.” 
 
2. Transparency of Analysts’ Performance
.  The firm will make publicly 
available (via its website, in a downloadable format), no later than 90 
days after the conclusion of each quarter (beginning with the first full 
calendar quarter that commences at least 120 days following the entry of 
the Final Judgment), the following information, if such information is 
included in any research report (other than any quantitative or technical 
research report) prepared and furnished by the firm during the prior 
quarter:  subject company, name(s) of analyst(s) responsible for 
certification of the report pursuant to Regulation AC, date of report, 
rating, price target, period within which the price target is to be achieved, 
earnings per share forecast(s) for the current quarter, the next quarter and 
the current full year, indicating the period(s) for which such forecast(s) 
are applicable (e.g., 3Q03, FY04, etc.), and definition/explanation of 
ratings used by the firm. 
 
3. Applicability
.  Except as specified in the second and third sentences of 
this Section II.3, the restrictions and requirements set forth in Section I 

 
13
[Separation of Research and Investment Banking] and Section II 
[Disclosure/Transparency and Other Issues] of this Addendum will only 
apply in respect of a research report that is both (i) prepared by the firm, 
and (ii) that relates to either (A) a U.S. company, or (B) a non-U.S. 
company for which a U.S. market is the principal equity trading market; 
provided, however, that such restrictions and requirements do not apply 
to Research activities relating to a non-U.S. company until the second 
calendar quarter following the calendar quarter in which the U.S. market 
became the principal equity trading market for such company.  
Notwithstanding the foregoing, Section I.7 [Coverage] of this Addendum 
will also apply to any research report (other than the Independent 
Research made available by the firm pursuant to Section III 
[Independent, Third-Party Research] of this Addendum) that has been 
furnished by the firm to investors in the U.S., but not prepared by the 
firm, but only to the extent that the report relates to either (A) a U.S. 
company, or (B) a non-U.S. company for which a U.S. market is the 
principal equity trading market.  Also notwithstanding the foregoing, 
Section II.1 [Disclosures] of this Addendum will also apply to any 
research report (other than the Independent Research made available by 
the firm pursuant to Section III of this Addendum) that has been 
furnished by the firm to investors in the U.S., but not prepared by the 
firm, including a report that relates to a non-U.S. company for which a 
U.S. market is not the principal equity trading market, but only to the 
extent that the report has been furnished under the firm’s name, has been 
prepared for the exclusive or sole use of the firm or its customers, or has 
been customized in any material respect for the firm or its customers. 
 
a. For purposes of this Section II.3, the firm will be deemed to have 
furnished a research report to investors in the U.S. if the firm has 
made the research report available to investors in the U.S. or has 
arranged for someone else to make it available to investors in the 
U.S. 
b. For purposes of this Section II.3, a “U.S. company” means any 
company incorporated in the U.S. or whose headquarters is in the 
U.S. 
c. For purposes of this Section II.3, the calendar quarter in which a 
non-U.S. company’s “principal equity trading market” becomes the 
U.S. market is a quarter when more than 50% of worldwide trading 

 
14
in the company’s common stock and equivalents (such as ordinary 
shares or common stock or ordinary shares represented by American 
Depositary Receipts) takes place in the U.S.  Trading volume shall 
be measured by publicly reported share volume.  
4. General
. 
 
a. The firm may not knowingly do indirectly that which it cannot do 
directly under this Addendum. 
 
b. The firm will adopt and implement policies and procedures 
reasonably designed to ensure that its associated persons (including 
but not limited to the firm’s Investment Banking personnel) cannot 
and do not seek to influence the contents of a research report or the 
activities of Research personnel for purposes of obtaining or 
retaining investment banking business.  The firm will adopt and 
implement procedures instructing firm personnel to report 
immediately to a member of the firm’s legal or compliance staff 
any attempt to influence the contents of a research report or the 
activities of Research personnel for such a purpose. 
 
5. Timing
.  Unless otherwise specified, the restrictions and requirements of 
this Addendum will be effective within 120 days of the entry of the Final 
Judgment, except that Sections I.5 [Compensation], I.6 [Evaluations], I.7 
[Coverage], I.8 [Termination of Coverage], I.9 [Prohibition on Soliciting 
Investment Banking Business], I.11 [Additional Restrictions on 
Activities by Research and Investment Banking Personnel], and II.4.a 
[General (subpart a)] and II.7 [Superseding Rules and Amendments] of 
this Addendum will be effective within 60 days of the entry of the Final 
Judgment, and Sections II.1.b [Disclosures (subpart b)] and III 
[Independent, Third-Party Research] of this Addendum will be effective 
within 270 days of the entry of the Final Judgment. 
 
6. Review of implementation
. 
a. The firm will retain, at its own expense, an Independent Monitor 
acceptable to the Staff of the SEC, the NYSE, and the NASD to 
conduct a review to provide reasonable assurance of the 
implementation and effectiveness of the firm’s policies and 
procedures designed to achieve compliance with the terms of this 

 
15
Addendum.  This review will begin 18 months after the date of the 
entry of the Final Judgment.  The Independent Monitor will produce a 
written report of its review, its findings as to the implementation and 
effectiveness of the firm’s policies and procedures, and its 
recommendations of other policies or procedures (or amendments to 
existing policies or procedures) as are necessary and appropriate to 
achieve compliance with the requirements and prohibitions of this 
Addendum.  The report will be produced to the firm and the Staff of 
the SEC, the NYSE and the NASD within 30 days from the 
completion of the review, but no later than 24 months from the date of 
entry of the Final Judgment.  The Independent Monitor shall have the 
option to seek an extension of time by making a written request to the 
Staff of the SEC. 
b. The firm will have a reasonable opportunity to comment on the 
Independent Monitor’s review and proposed report prior to its 
submission, including a reasonable opportunity to comment on any 
and all recommendations, and to seek confidential treatment of such 
information and recommendations set forth therein to the extent that 
the report concerns proprietary commercial and financial information 
of the firm.  This report will be subject to the protections from 
disclosure set forth in the rules of the SEC, including the protections 
from disclosure set forth in 5 U.S.C. § 552(b)(8) and 17 C.F.R. § 
200.80(b)(8), and will not constitute a record, report, statement or data 
compilation of a public office or agency under Rule 803(8) of the 
Federal Rules of Evidence. 
c. The firm will adopt all recommendations contained in the written 
report of the Independent Monitor; provided, however, that as to any 
recommendation that the firm believes is unduly burdensome or 
impractical, the firm may demonstrate why the recommended policy 
or procedure is, under the circumstances, unreasonable, impractical 
and/or not designed to yield benefits commensurate with its cost, or 
the firm may suggest an alternative policy or procedure designed to 
achieve the same objective, and submit such explanation and/or 
alternative policy or procedure in writing to the Independent Monitor 
and to the Staff of the SEC.  The firm and the Independent Monitor 
shall then attempt in good faith to reach agreement as to any policy or 
procedure as to which there is any dispute and the Independent 
Monitor shall reasonably evaluate any alternative policy or procedure 

 
16
proposed by the firm.  If an agreement on any issue is not reached, the 
firm will abide by the determinations of the Staff of the SEC (which 
shall be made after allowing the firm and the Independent Monitor to 
present arguments in support of their positions), and adopt those 
recommendations the Staff of the SEC deems appropriate. 
d. The firm will cooperate fully with the Independent Monitor in this 
review, including making such non-privileged information and 
documents available, as the Independent Monitor may reasonably 
request, and by permitting and requiring the firm’s employees and 
agents to supply such non-privileged information and documents as 
the Independent Monitor may reasonably request. 
e. To ensure the independence of the Independent Monitor, the firm (i) 
shall not have the authority to terminate the Independent Monitor 
without the prior written approval of the SEC staff; and (ii) shall 
compensate the Independent Monitor, and persons engaged to assist 
the Independent Monitor, for services rendered pursuant to this Order 
at their reasonable and customary rates. 
f. For the period of engagement and for a period of three years from 
completion of the engagement, the Independent Monitor shall not 
enter into any employment, consultant, attorney-client, auditing or 
other professional relationship with the firm, or any of its present or 
former affiliates, directors, officers, employees, or agents acting in 
their capacity as such.  Any entity with which the Independent 
Monitor is affiliated or of which he/she is a member, and any person 
engaged to assist the Independent Monitor in performance of his/her 
duties under this Order shall not, without prior written consent of the 
Staff of the SEC, enter into any employment, consultant, attorney-
client, auditing or other professional relationship with the firm, or any 
of its present or former affiliates, directors, officers, employees, or 
agents acting in their capacity as such for the period of the 
engagement and for a period of three years after the engagement. 
g. Five years after the date of the entry of the Final Judgment, the firm 
shall certify to the Staff of the SEC, the NYSE, and the NASD that the 
firm has complied in all material respects with the requirements and 
prohibitions set forth in this Addendum or, in the event of material 
non-compliance, will describe such material non-compliance. 

 
17
7. Superseding Rules and Amendments
.  In the event that the SEC adopts a 
rule or approves an SRO rule or interpretation with the stated intent to 
supersede any of the provisions of this settlement, the SEC or SRO rule 
or interpretation will govern with respect to that provision of the 
settlement and such provision will be superseded.  In addition, each of 
the SEC, NYSE, and the NASD agrees that the SEC Staff may provide 
interpretive guidance with respect to the terms of the settlement as 
requested by the firm and that, subject to Court approval, the SEC and 
the firm may agree to amend or modify any term of the settlement, in 
each case, without any further action or involvement by any other 
regulator in any related proceeding.  With respect to any term in Section I 
or II of this Addendum that has not been superseded (as set forth above) 
within five years of the entry of the Final Judgment, it is the expectation 
of Defendant, the SEC, NYSE, and NASD that the SEC would agree to 
an amendment or modification of such term, subject to Court approval, 
unless the SEC believes such amendment or modification would not be in 
the public interest. 
 
8. Other Obligations and Requirements
.  Except as otherwise specified, the 
requirements and prohibitions of this Addendum shall not relieve the firm 
of any other applicable legal obligation or requirement. 
  
III.     Independent, Third-Party Research  
 
1. Obligation to Make Available
.  Each year, for the period ending five 
years after the effective date of this Section III (as set forth in Section 
II.5 [Timing] of this Addendum), the firm will be required to contract 
with no fewer than three independent providers of research 
(“Independent Research Providers”) at a time in order to procure and 
make available Independent Research (as defined below) to the firm’s 
customers in the U.S. as set forth below.  The firm may satisfy this 
requirement by contracting with a consolidator that provides access to 
the Independent Research of at least three Independent Research 
Providers.  There is, however, no requirement that there be at least 
three Independent Research Providers for the Common Stock of each 
Covered Company (as those terms are defined below): 
 
a. For common stock and equivalents (such as ordinary shares or 
common stock or ordinary shares represented by American 
Depositary Receipts) listed on a U.S. national securities 

 
18
exchange or quoted in Nasdaq (such securities hereinafter, 
collectively, “Common Stock”) and covered in the firm’s 
research reports (other than those limited to quantitative or 
technical research reports) (an issuer of such covered Common 
Stock hereinafter called a “Covered Company”), the firm, 
through an Independent Consultant (as discussed below) will 
use its reasonable efforts to procure, and shall make available to 
its customers in the U.S., Independent Research on such 
Covered Company’s Common Stock.  (If the Independent 
Research Providers drop coverage or do not timely pick up 
coverage of the Common Stock of a Covered Company, the 
firm will not be in violation of any of the requirements in this 
Section III, and may continue to disseminate its own research 
reports on the Common Stock of the Covered Company without 
making available any Independent Research on the Common 
Stock of the Covered Company, if the firm takes reasonable 
steps to request that the Independent Consultant procure such 
coverage promptly.) 
 
i. For purposes of this Section III, the firm’s research 
reports include research reports that have not been 
prepared by the firm, but only to the extent that such 
reports have been furnished under the firm’s name, 
have been prepared for the exclusive or sole use of the 
firm or its customers, or have been customized in any 
material respect for the firm or its customers.  
 
ii. A non-U.S. company for which a U.S. market is not the 
principal equity trading market shall only be considered 
a Covered Company if, in the calendar quarter ended 
March 31, 2004, or in any subsequent calendar quarter 
during the period that the firm’s obligations to procure 
and make available Independent Research under this 
Section III are effective, the publicly reported, average 
daily dollar volume of U.S. trading in such company’s 
Common Stock (measured by multiplying the publicly 
reported, average daily share volume of U.S. trading 
during the quarter by the closing price per share of the 
Common Stock on the last day of the quarter), exceeded 
$2.5 million, and (b) the outstanding total public float 

 
19
of the Common Stock as of the last day of such 
calendar quarter exceeded $150 million, or, if the data 
necessary to calculate the outstanding total public float 
is not readily available, the market capitalization of the 
Common Stock as of the last day of such calendar 
quarter exceeded $150 million.  Further, the firm’s 
obligation to procure and make available Independent 
Research with respect to such company shall become 
effective at the later of:  (a) 90 days after the end of the 
calendar quarter in which the company met the 
foregoing trading and public float tests; or (b) the 
effective date of this Section III.     
    
 
b. For purposes of this Section III, Independent Research means 
(i) a research report (other than technical research reports) 
prepared by an unaffiliated person or entity, or (ii) a statistical 
or other survey or analysis of research reports (including ratings 
and price targets) issued by a broad range of persons and 
entities, including persons and entities having no association 
with investment banking activities, which survey or analysis 
has been prepared by an unaffiliated person or entity. 
 
c. The firm will adopt policies and procedures reasonably 
designed to ensure that, in connection with any solicited order 
for a customer in the U.S. relating to the Common Stock of a 
Covered Company, and if Independent Research on the 
Covered Company’s Common Stock is available, the registered 
representative will have informed the customer, during the 
solicitation, that the customer can receive Independent Research 
on the Covered Company’s Common Stock at no cost to the 
customer (the “Notice Requirement”).   
 
d. Notwithstanding the foregoing, the Notice Requirement will not 
apply to (i) the solicitation of an Institutional Customer unless 
such Institutional Customer, after due notice and opportunity, 
has advised the firm that it wishes to have the Notice 
Requirement apply to it (“Participating Institutional 
Customer”).  Any Institutional Customer who has not so 
advised the firm is hereinafter referred to as a “Non-
Participating Institutional Customer”; (ii) orders as to which 

 
20
discretion was exercised by the firm, pursuant to a written 
discretionary account agreement or written grant of trading 
authorization; or (iii) a solicitation by an entity affiliated with 
the Defendant if such entity does not furnish to its customers 
research reports under the firm’s name, prepared by the firm or 
for the exclusive or sole use of the firm or its customers, or 
research reports that have been customized in any material 
respect for the firm or its customers. 
 
e. For the purposes of the notice, confirmation, and account 
statement disclosure requirements with respect to orders as to 
which discretion was exercised by an investment adviser 
pursuant to a written discretionary account agreement or written 
grant of trading authorization, the firm must treat the 
investment adviser as 
(regardless of whether the investment 
adviser is an institutional entity or a natural person)
: (i) a natural 
person, if such adviser has $1 million dollars or less invested in 
securities in the aggregate in its portfolio and/or under 
management; (ii) a Small Institutional Customer if such 
investment adviser has less than $10 million and more than $1 
million invested in securities in the aggregate in its portfolio 
and/or under management; and (iii) an Institutional Customer if 
such investment adviser has at least $10 million invested in 
securities in the aggregate in its portfolio and/or under 
management.  Notwithstanding the foregoing, nothing 
precludes the firm from providing disclosure in addition to the 
foregoing required minimum. 
 
f. With respect to a Participating Institutional Customer, the firm 
may satisfy the 
Notice Requirement by providing the 
Participating Institutional Customer with, instead of notice at 
the time of each solicited order, annual written notice of the 
availability of Independent Research on Covered Companies’ 
Common Stock. 
 
g. With respect to a Small Institutional Customer, the firm may 
satisfy the Notice Requirement by providing the Small 
Institutional Customer with, instead of notice at the time of 
each solicited order, annual written notice of the availability of 
Independent Research on Covered Companies’ Common Stock, 

 
21
if such Small Institutional Customer advised the firm that it 
wishes to receive such annual written notice instead of 
receiving notice at the time of each solicited order.   
 
h. Each trade confirmation sent by the Defendant to a customer 
with respect to an order as to which the Notice Requirement 
applies will set forth (or will be accompanied by a separate 
statement, which shall be considered part of the confirmation, 
that will set forth), as of the time the trade confirmation is 
generated, the ratings, if any, contained in the firm’s own 
research reports and in Independent Research procured for the 
firm with respect to the Common Stock of the Covered 
Company that is the subject of the order (the “Trade 
Confirmation Disclosure Requirement”). 
 
Notwithstanding the foregoing, the Defendant may provide a 
Small Institutional Customer with, instead of trade-by-trade 
ratings information on each confirmation, annual written notice 
of the website(s) where Independent Research ratings 
information and the firm’s ratings information can be found, if 
such Small Institutional Customer has advised the Defendant 
that it wishes to receive such annual written notice instead of 
trade-by-trade ratings information on each confirmation.  With 
respect to the Common Stock of a Covered Company, the 
website(s) shall make available separate lists setting forth (with 
respect to each of the firm’s research reports and each 
Independent Research report of each Independent Research 
Provider) the date of each research report issued by the firm and 
each IRP, respectively, the name of the issuer covered in such 
report, and the rating contained therein (if any) over the 
preceding twelve months (“Qualifying Website(s)”).   
 
If customers of the firm (other than Institutional or Small 
Institutional Customers) have access to the Qualifying 
Website(s), the Qualifying Website(s) must also provide access, 
via hyperlink, to the full text of each Independent Research 
report (regarding the Common Stock of a Covered Company) 
of each Independent Research Provider over the preceding 
twelve months.  
 

 
22
With respect to a Participating Institutional Customer, the 
Defendant may satisfy the Trade Confirmation Disclosure 
Requirement by providing the Participating Institutional 
Customer with, instead of trade-by-trade ratings information on 
each confirmation, annual written notice of the Qualifying 
Website(s) where Independent Research ratings information 
and the firm’s ratings information can be found. 
 
i. Each periodic account statement sent by the Defendant to a 
customer in the U.S. that reflects a position in the Common 
Stock of a Covered Company will set forth (or will be 
accompanied by a separate statement, which shall be considered 
part of the periodic account statement, that will set forth), as of 
the end of the period covered by the statement, the ratings, if 
any, contained in the firm’s own research reports and in the 
Independent Research made available by the firm on the 
Common Stock of each such Covered Company (“Periodic 
Account Statement Disclosure Requirement”); provided, 
however, that this requirement will not apply to Non- 
Participating Institutional Customers or discretionary accounts, 
and provided further that, with respect to Participating 
Institutional Customers, the Defendant may satisfy the Periodic 
Account Statement Disclosure Requirement by providing 
Participating Institutional Customers with, instead of ratings 
information in periodic account statements, annual written 
notice of the Qualifying Website(s) where Independent 
Research ratings information and the firm’s ratings information 
can be found. 
 
Notwithstanding the foregoing, the Defendant may satisfy the 
Periodic Account Statement Disclosure Requirement by 
providing a Small Institutional Customer with, instead of 
ratings information in periodic account statements, annual 
written notice of the Qualifying Website(s) where Independent 
Research ratings information and the firm’s ratings information 
can be found, if such Small Institutional Customer has advised 
the Defendant that it wishes to receive such annual written 
notice instead of ratings information in periodic account 
statements. 
 

 
23
j. The Independent Research rating(s) disclosed on trade 
confirmations and periodic account statements as set forth in 
Section III.1(h) and (i) above shall be chosen by the 
Independent Consultant.  If only one rating is disclosed by 
Defendant with respect to a particular Covered Company, it 
cannot be a consensus rating. 
  
k. Notice of the availability of Independent Research on Covered 
Companies’ Common Stock will also be included prominently 
in the periodic account statements of the Defendant’s customers 
in the U.S., in the firm’s research reports, and on the firm’s 
website.   
 
l. The firm will make the Independent Research available to its 
customers in the U.S. using, for each customer, the means of 
dissemination equivalent to those it uses to provide the 
customer with the firm’s own research reports, unless the firm 
and customer agree on another means of dissemination; 
provided, however, that nothing herein shall require or 
authorize the firm to comply with the Notice Requirement or 
make available or disseminate Independent Research at a time 
when doing so would violate Section 5 of the Securities Act of 
1933 or the other provisions of the federal securities laws or the 
rules and regulations thereunder.  If and to the extent the firm is 
able to make available or disseminate its own research reports 
on the Common Stock of a Covered Company pursuant to Rule 
137, Rule 138(a) or Rule 139(a) under the Securities Act of 
1933 and in reliance on Regulation M under the Securities 
Exchange Act of 1934, then the firm is also authorized and 
required to make available or disseminate Independent 
Research on the Common Stock of such Covered Company 
(even if the Independent Research does not meet the 
requirements of such Rule).  Notwithstanding this Section 
III.1.l, if the firm determines, because of legal, compliance or 
similar concerns, not to furnish or make available its own 
research reports on the Common Stock of a Covered Company 
for a limited period of time, it shall not be required to make 
available the Independent Research on such Covered Company 
for such period of time. 
 

 
24
m. If, during the period that the firm’s obligations to procure and 
make available Independent Research under this Section III are 
effective, the firm terminates coverage of the Common Stock of 
a Covered Company, the firm, through its Independent 
Consultant, will make reasonable efforts to continue to procure 
and make available Independent Research on the Common 
Stock of such company for a period of at least 18 months after 
termination of coverage (subject to expiration of the firm’s 
obligations under this Section III). 
 
n. The firm will not be responsible or liable for (i) the procurement 
decisions of the Independent Consultant (as discussed in 
Section III.2 [Appointment of Independent Consultant to 
Oversee the Procurement of Independent Research] of this 
Addendum) with respect to the Independent Research, (ii) the 
Independent Research or its content, (iii) customer transactions, 
to the extent based on the Independent Research, or (iv) claims 
arising from or in connection with the inclusion of Independent 
Research ratings in the firm’s confirmations and periodic 
account statements or on the Qualifying Websites(s), to the 
extent such claims are based on those ratings.  The firm will not 
be required to supervise the production of the Independent 
Research procured by the Independent Consultant and will have 
no responsibility to comment on the content of the Independent 
Research.  The firm may advise its customers of the foregoing 
in its discretion. 
 
o.  The Independent Consultant will not be liable for (i) its 
procurement decisions, (ii) the Independent Research or its 
content, (iii) customer transactions, to the extent based on the 
Independent Research, or (iv) claims arising from or in 
connection with the inclusion of Independent Research ratings 
in the firm’s confirmations and periodic account statements or 
on the Qualifying Websites(s), to the extent such claims are 
based on those ratings, unless the Independent Consultant has 
carried out such duties in bad faith or with willful misconduct.  
The firm will indemnify the Independent Consultant for any 
liability arising from the Independent Consultant’s good-faith 
performance of its duties as such.  
 

 
25
2. Appointment of Independent Consultant to Oversee the Procurement of 
Independent Research.  Within 30 days of the entry of the Final 
Judgment, an Independent Consultant acceptable to the SEC Staff, the 
NYSE, the NASD, and the firm shall be named to oversee the 
procurement of Independent Research from Independent Research 
Providers.  The Independent Consultant will have the final authority 
(following consultation with the firm and in accordance with the criteria 
set forth in Section III.3 [Selection of Independent Research Providers] 
of this Addendum) to procure the Independent Research.  The 
Independent Consultant will not have had any significant financial 
relationship with the firm during the prior three years and may not have 
any financial relationship with the firm for three years following his or 
her work as the Independent Consultant.  The Independent Consultant’s 
fee arrangement will be subject to the approval of the Staff of the SEC, 
the NYSE, and the NASD.  In the event that an Independent Consultant 
must be replaced, the replacement shall be acceptable to the Staff of the 
SEC, the NYSE, the NASD, and the firm, and shall be subject to these 
same conditions. 
 
3. Selection of Independent Research Providers
.  The Independent 
Consultant will seek to procure research reports on the Common Stock of 
all Covered Companies from Independent Research Providers.  
Independent Research Providers may not perform investment banking 
business of any kind and may not provide brokerage services in direct 
and significant competition with the firm.  In addition, the Independent 
Consultant will use the following criteria in selecting and contracting 
with Independent Research Providers to provide Independent Research. 
 
a. whether and to what extent the Independent Research Provider 
or any of its affiliates or associated persons is engaged in 
activities (including, but not limited to, activities involving 
Covered Companies or their securities), or has a business or 
other relationship with the firm or any of its affiliates or 
associated persons, that may conflict or create the appearance of 
conflict with its preparation and publication of the Independent 
Research; 
 
b. the desirability of multiple coverage of certain Covered 
Companies (e.g., by size of company, industry sector, 
companies underwritten by the firm, etc.); 

 
26
 
c. the extent to which the Independent Research Provider has a 
client base and revenue stream broad enough to ensure its 
independence from the firm; 
 
d. the utility of the Independent Research Provider’s Independent 
Research to the firm’s customers, including the inclusion of 
ratings and price targets in such research and the extent to 
which the firm’s customers actually use the research; and with 
respect to surveys or analyses described above in Section 
III.1.b(ii), the extent to which the Independent Research 
provides customers with a means of comparing the firm’s 
research reports to those published by other persons and 
entities, including persons and entities having no association 
with investment banking activities;  
 
e. the quality and accuracy of the Independent Research 
Provider’s past research, including during the term of the 
Independent Consultant’s tenure; 
 
f. the experience, expertise, reputation and qualifications 
(including, as appropriate, registrations) of the Independent 
Research Provider and its personnel; and 
g. the cost of the Independent Research, especially in light of the 
five-year period set forth in Section III.1 above for the firm to 
make Independent Research available to its investing 
customers.   
 
4. Disclosure Language.  Language substantially to the effect set forth 
below may be used by the firm and its registered representatives to 
inform the firm’s customers of the availability of Independent Research: 
 
a. {Disclosure to customers as required by Section III.1.c 
[Obligation to Make Available subpart c] of this Addendum.} 
 
“There is also independent, third-party research available on 
this company, which you can get at no cost [from our 
website/hyperlink] or by calling [toll-free number], or which I 
can arrange to send to you if you would like.” 

 
27
 
b. {General website and periodic customer account statement 
disclosure as required by Section III.1.k. [Obligation to Make 
Available subpart k] of this Addendum.} 
 
“Independent, third-party research on certain companies 
covered by the firm’s research is available to customers of 
[firm] in the United States at no cost.  Customers can access 
this research at [our website/hyperlink] or can call [toll-free 
number] to request that a copy of this research be sent to them.” 
 
5. Annual Reporting
.  The Independent Consultant will report annually to 
the Staff of the SEC, the NYSE, and the NASD on its selection of 
Independent Research Providers, the Independent Research it has 
procured, the cost of the Independent Research it has procured to date, 
and the Independent Consultant’s fees and expenses to date
. 

Addendum A 
 

Undertakings 
 

The firm shall comply with the following undertakings: 
 

I.   Separation of Research and Investment Banking 
 

1. Reporting Lines.  Research and Investment Banking will be separate 
units with entirely separate reporting lines within the firm – i.e., Research 
will not report directly or indirectly to or through Investment Banking.  
For these purposes, the head of Research may report to or through a 
person or persons to whom the head of Investment Banking also reports, 
provided that such person or persons have no direct responsibility for 
Investment Banking or investment banking activities. 

 
a. As used throughout this Addendum, the term “firm” means the 

Defendant, Defendant’s successors and assigns (which, for these 
purposes, shall include a successor or assign to Defendant’s 
investment banking and research operations), and their affiliates, 
other than “exempt investment adviser affiliates.” 

 
b. As used throughout this Addendum, the term "exempt investment 

adviser affiliate" means an investment adviser affiliate (including, 
for these purposes, a separately identifiable department or division 
that is principally engaged in the provision of investment advice to 
managed accounts as governed by the Investment Advisers Act of 
1940 or investment companies under the Investment Company Act 
of 1940) having no officers (or persons performing similar 
functions) or employees in common with the firm (which, for 
purposes of this Section I.1.b, shall not include the investment 
adviser affiliate) who can influence the activities of the firm's 
Research personnel or the content of the firm's research reports; 
provided that the firm (i) maintains and enforces written policies 
and procedures reasonably designed to prevent the firm, any 
controlling persons, officers (or persons performing similar 
functions), or employees of the firm from influencing or seeking to 
influence the activities of Research personnel of, or the content of 
research reports prepared by, the investment adviser affiliate; (ii) 
obtains an annual independent assessment of the operation of such 



 2

policies and procedures; and (iii) does not furnish to its customers 
research reports prepared by the investment adviser affiliate or 
otherwise use such investment adviser affiliate to do indirectly 
what the firm may not do directly under this Addendum. 

 
c. As used throughout this Addendum, the term “Investment 

Banking” means all firm personnel engaged principally in 
investment banking activities, including the solicitation of issuers 
and structuring of public offering and other investment banking 
transactions.  It also includes all firm personnel who are directly or 
indirectly supervised by such persons and all personnel who 
directly or indirectly supervise such persons, up to and including 
Investment Banking management. 

 
d. As used throughout this Addendum, the term “Research” means all 

firm personnel engaged principally in the preparation and/or 
publication of research reports, including firm personnel who are 
directly or indirectly supervised by such persons and those who 
directly or indirectly supervise such persons, up to and including 
Research management. 

 
e. As used throughout this Addendum, the term “research report” 

means any written (including electronic) communication that is 
furnished by the firm to investors in the U.S. and that includes an 
analysis of the common stock, any security convertible into 
common stock, or any derivative thereof, including American 
Depositary Receipts (collectively, “Securities”), of an issuer or 
issuers and provides information reasonably sufficient upon which 
to base an investment decision; provided, however, that a “research 
report” shall not include: 

 
i. the following communications, if they do not include 

(except as specified below) an analysis, recommendation or 
rating (e.g., buy/sell/hold, under perform/market 
perform/outperform, underweight/market 
weight/overweight, etc.) of individual securities or issuers: 

 
1. reports discussing broad-based indices, such as the 

Russell 2000 or S&P 500 index; 



 3

2. reports commenting on economic, political or market 
(including trading) conditions; 

3. technical or quantitative analysis concerning the 
demand and supply for a sector, index or industry 
based on trading volume and price; 

4. reports that recommend increasing or decreasing 
holdings in particular industries or sectors or types of 
securities; and 

5. statistical summaries of multiple companies’ financial 
data and broad-based summaries or listings of 
recommendations or ratings contained in previously-
issued research reports, provided that such summaries 
or listings do not include any analysis of individual 
companies; and 

ii. the following communications, even if they include 
information reasonably sufficient upon which to base an 
investment decision or a recommendation or rating of 
individual securities or companies: 

  
1. an analysis prepared for a current or prospective 

investing customer or group of current or prospective 
investing customers by a registered salesperson or 
trader who is (or group of registered salespersons or 
traders who are) not principally engaged in the 
preparation or publication of research reports; and 

2. periodic reports, solicitations or other 
communications prepared for current or prospective  
investment company shareholders (or similar 
beneficial owners of trusts and limited partnerships) 
or discretionary investment account clients, provided 
that such communications discuss past performance or 
the basis for previously made discretionary 
investment decisions. 

 



 4

f. As used throughout this Addendum, the term “technical research 
report” means any written (including electronic) communication 
that is furnished by the firm to investors in the U.S. and that 
includes an analysis of the Securities of an issuer or issuers, that is 
based solely on prices and trading volume and not on the issuer's 
financial information, business prospects, or contact with issuer 
management, and that provides information reasonably sufficient 
upon which to base an investment decision. 

 
g. As used throughout this Addendum, the term “quantitative 

research report” means any written (including electronic) 
communication that is furnished by the firm to investors in the 
U.S. and that includes an analysis of the Securities of an issuer or 
issuers, that relies solely on the systematic application of statistical 
or numerical techniques to publicly available data, that does not 
include a qualitative assessment of an issuer's business prospects or 
contact with issuer management, and that provides information 
reasonably sufficient upon which to base an investment decision. 

 
h. As used throughout this Addendum, the term “Institutional 

Customer” means an entity other than a natural person having at 
least $10 million invested in securities in the aggregate in its 
portfolio and/or under management. 

 
i. As used throughout this Addendum the term “Small Institutional 

Customer” means an entity other than a natural person having less 
than $10 million and more than $1 million invested in securities in 
the aggregate in its portfolio and/or under management.  

 
2.  Legal/Compliance.  Research will have its own dedicated legal and  

compliance staff, who may be a part of the firm’s overall 
compliance/legal infrastructure. 

 
3.   Budget.  For the firm’s first fiscal year following the entry of the Final 

Judgment in the SEC’s action against Defendant (“Final Judgment”) 
and thereafter, Research budget and allocation of Research expenses 
will be determined by the firm’s senior management (e.g., 
CEO/Chairman/management committee, other than Investment Banking 
personnel) without input from Investment Banking and without regard 
to specific revenues or results derived from Investment Banking, though 



 5

revenues and results of the firm as a whole may be considered in 
determining Research budget and allocation of Research expenses.  On 
an annual basis thereafter, the Audit Committee of the firm’s 
holding/parent company (or comparable independent persons/group 
without management responsibilities) will review the budgeting and 
expense allocation process with respect to Research to ensure 
compliance with this requirement. 
 

4.   Physical Separation.  Research and Investment Banking will be 
physically separated.  Such physical separation will be reasonably 
designed to prevent the intentional and unintentional flow of information 
between Research and Investment Banking.  

 
5. Compensation.  Compensation of professional Research personnel will 

be determined exclusively by Research management and the firm’s 
senior management (but not including Investment Banking personnel) 
using the following principles: 

 
a. Investment Banking will have no input into compensation 

decisions. 
 
b. Compensation may not be based directly or indirectly on 

Investment Banking revenues or results; provided, however, that 
compensation may relate to the revenues or results of the firm as a 
whole. 

 
c. A significant portion of the compensation of anyone principally 

engaged in the preparation of research reports (as defined in this 
Addendum) that he or she is required to certify pursuant to 
Regulation AC (such person hereinafter a “lead analyst”) must be 
based on quantifiable measures of the quality and accuracy of the 
lead analyst’s research and analysis, including his or her ratings 
and price targets, if any.  In assessing quality, the firm may rely on, 
among other things, evaluations by the firm’s investing customers, 
evaluations by the firm’s sales personnel and rankings in 
independent surveys.  In assessing accuracy, the firm may use the 
actual performance of a company or its equity securities to rank its 
own lead analysts’ ratings and price targets, if any, and forecasts, if 
any, against those of other firms, as well as against benchmarks 
such as market or sector indices. 



 6

 
d. Other factors that may be taken into consideration in determining 

lead analyst compensation include:  (i) market capitalization of, 
and the potential interest of the firm’s investing clients in research 
with respect to, the industry covered by the analyst; (ii) Research 
management’s assessment of the analyst’s overall performance of 
job duties, abilities and leadership; (iii) the analyst’s seniority and 
experience; (iv) the analyst’s productivity; and (v) the market for 
the hiring and retention of analysts. 

 
e. The criteria to be used for compensation decisions will be 

determined by Research management and the firm’s senior 
management (not including Investment Banking) and set forth in 
writing in advance. 

 
f. Research management will document the basis for each 

compensation decision made with respect to (i) anyone who, in the 
last 12 months, has been required to certify a research report (as 
defined in this Addendum) pursuant to Regulation AC; and (ii) 
anyone who is a member of Research management (except in the 
case of senior-most Research management, in which case the basis 
for each compensation decision will be documented by the firm’s 
senior management). 

   
On an annual basis, the Compensation Committee of the firm’s 
holding/parent company (or comparable independent persons/group 
without management responsibilities) will review the compensation 
process for Research personnel.  Such review will be reasonably 
designed to ensure that compensation decisions have been made in a 
manner that is consistent with these requirements. 

 
6.   Evaluations.  Evaluations of Research personnel will not be done by, nor 

will there be input from, Investment Banking personnel. 
 

7.   Coverage.  Investment Banking will have no input into company-specific  
coverage decisions (i.e., whether or not to initiate or terminate coverage 
of a particular company in research reports furnished by the firm), and 
investment banking revenues or potential revenues will not be taken into 
account in making company-specific coverage decisions; provided, 
however, that this requirement does not apply to category-by-category 



 7

coverage decisions (e.g., a given industry sector, all issuers underwritten 
by the firm, companies meeting a certain market cap threshold). 

 
8. Termination of Coverage.  When a decision is made to terminate 

coverage of a particular company in the firm’s research reports (whether 
as a result of a company-specific or category-by-category decision), the 
firm will make available a final research report on the company using the 
means of dissemination equivalent to those it ordinarily uses; provided, 
however, that no final report is required for any company as to which the 
firm’s prior coverage has been limited to quantitative or technical 
research reports.  Such report will be comparable to prior reports, unless 
it is impracticable for the firm to produce a comparable report (e.g., if the 
analyst covering the company and/or sector has left the firm).  In any 
event, the final research report must disclose:  the firm’s termination of 
coverage; and the rationale for the decision to terminate coverage. 

 
9. Prohibition on Soliciting Investment Banking Business.  Research is 

prohibited from participating in efforts to solicit investment banking 
business.  Accordingly, Research may not, among other things, 
participate in any “pitches” for investment banking business to 
prospective investment banking clients, or have other communications 
with companies for the purpose of soliciting investment banking 
business. 

 
10. Firewalls Between Research and Investment Banking.  So as to reduce 

further the potential for conflicts of interest or the appearance of conflicts 
of interest, the firm must create and enforce firewalls between Research 
and Investment Banking reasonably designed to prohibit all 
communications between the two except as expressly described below:  
 
a. Investment Banking personnel may seek, through Research 

management (or an appropriate designee with comparable 
management or control responsibilities (“Designee”)) or in the 
presence of internal legal or compliance staff, the views of Research 
personnel about the merits of a proposed transaction, a potential 
candidate for a transaction, or market or industry trends, conditions or 
developments.  Research personnel may respond to such inquiries on 
these subjects through Research management or its Designee or in the 
presence of internal legal or compliance staff.  In addition, Research 
personnel, through Research management or its Designee or in the 



 8

presence of internal legal or compliance staff, may initiate 
communications with Investment Banking personnel relating to 
market or industry trends, conditions or developments, provided that 
such communications are consistent in nature with the types of 
communications that an analyst might have with investing customers.  
Any communications between Research and Investment Banking 
personnel must not be made for the purpose of having Research 
personnel identify specific potential investment banking transactions. 

 
b. In response to a request by a commitment or similar committee or 

subgroup thereof, Research personnel may communicate their views 
about a proposed transaction or potential candidate for a transaction to 
the committee or subgroup thereof in connection with the review of 
such transaction or candidate by the committee.  Investment Banking 
personnel working on the proposed transaction may participate with 
the Research personnel in these discussions with such committee or 
subgroup.  However, the Research personnel also must have an 
opportunity to express their views to the committee or subgroup 
outside the presence of such Investment Banking personnel. 

 
c. Research personnel may assist the firm in confirming the adequacy of 

disclosure in offering or other disclosure documents for a transaction 
based on the analysts’ communications with the company and other 
vetting conducted outside the presence of Investment Banking 
personnel, but to the extent communicated to Investment Banking 
personnel, such communication shall only be made in the presence of 
underwriters’ or other counsel on the transaction or internal legal or 
compliance staff. 

 
d.  After the firm receives an investment banking mandate, or in 

connection with a block bid or similar transaction, Research personnel 
may  

   
(i) Communicate their views on the pricing and structuring of 

the transaction to personnel in the firm’s equity capital 
markets group, which group’s principal job responsibility is 
the pricing and structuring of transactions;   

 



 9

(ii) Provide to personnel in the firm’s equity capital markets 
group information obtained from investing customers 
relevant to the pricing and structuring of the transaction;  

 
(iii) Participate with the equity capital markets group, or 

independently, in efforts to educate the firm’s sales force 
regarding the transaction, including assisting in the 
preparation of internal-use memoranda (including 
presentations in electronic format) and communicating with 
the firm’s sales force, provided that Research personnel may 
not appear jointly with management of the issuer or 
Investment Banking personnel other than members of the 
equity capital markets group in such communications with 
the firm’s sales force, and provided that the following 
conditions are satisfied: 

  
1) Such oral communications by Research personnel with 

the firm’s sales force personnel regarding the transaction 
in which a recommendation or view, whether or not 
labeled as such, is expressed by such Research personnel 
regarding the transaction must have a reasonable basis; 

2) Such oral communications to a group of ten or more of 
the firm’s sales force must be “fair and balanced”, as 
such phrase is generally understood under NASD Rule 
2210(d)(1) and after taking into consideration the overall 
context in which such communications are made 
(hereinafter referred to as the “fair and balanced 
standard”).  In addition, all such oral communications to 
a group of ten or more of the firm’s sales force must be 
made in the presence of internal legal or compliance 
personnel;  

3) All internal-use memoranda (or portions thereof) 
regarding such transaction that are identified as being the 
views of Research personnel (such memoranda or 
portions thereof hereinafter referred to as “internal 
Research memoranda”) must comply with the fair and 
balanced standard;   

4) Internal Research memoranda that are distributed to a 
group of ten or more of the firm’s sales force must be 



 10

reviewed in advance by internal legal or compliance 
personnel;  

5) A written log of all oral communications described in (2) 
above must be maintained; and 

6) All written logs and all internal Research memoranda 
described in (4) above must be retained for the period 
required by Rule 17a-4(b)(4). 

 
e. Research personnel may attend or participate in a widely-attended 
conference attended by Investment Banking personnel or in which 
Investment Banking personnel participate, provided that the Research 
personnel do not participate in activities otherwise prohibited herein. 

  
f. Research and Investment Banking personnel may attend or participate 
in widely-attended firm or regional meetings at which matters of general 
firm interest are discussed.  Research management and Investment 
Banking management may attend meetings or sit on firm management, 
risk or similar committees at which general business and plans (including 
those of Investment Banking and Research) and other matters of general 
firm interest are discussed.  Research and Investment Banking personnel 
may communicate with each other with respect to legal or compliance 
issues, provided that internal legal or compliance staff is present.  

 
g. Communications between Research and Investment Banking 
personnel that are not related to investment banking or research activities 
may take place without restriction. 

 
11. Additional Restrictions on Activities By Research and Investment 

Banking Personnel.    
 

a. Research personnel are prohibited from participating in company- or 
Investment Banking-sponsored road shows related to a public offering 
or other investment banking transaction. 

 
b. Investment Banking personnel are prohibited from directing Research 

personnel to engage in marketing or selling efforts to investors with 
respect to an investment banking transaction. 

 
c. After the firm receives an investment banking mandate relating to a 

public offering of securities, Research personnel may communicate 



 11

with investors regarding such offering provided that Research 
personnel may not appear jointly with management of the issuer or 
Investment Banking personnel in such communications, and provided 
that the following conditions are satisfied: 

 
1) Such oral communications by Research personnel with investors 

regarding the offering in which a recommendation or view, 
whether or not labeled as such, is expressed by such Research 
personnel regarding the offering must have a reasonable basis; 

2) Such oral communications to a group of ten or more investors 
regarding such offering must comply with the fair and balanced 
standard; 

3) All such oral communications to a group of ten or more investors 
must be made in the presence of internal legal or compliance 
personnel; 

4) A written log of all oral communications described in (2) above 
must be maintained; and  

5) All written logs must be retained for the period required by Rule 
17a-4(b)(4). 

 
12. Oversight.  An oversight/monitoring committee or committees, which 

will be comprised of representatives of Research management and may 
include others (but not personnel from Investment Banking), will be 
created to: 

 
a. review (beforehand, where practicable) all changes in ratings, if any, 

and material changes in price targets, if any, contained in the firm’s 
research reports; 

 
b. conduct periodic reviews of research reports to determine whether 

changes in ratings or price targets, if any, should be considered; and 
 

c. monitor the overall quality and accuracy of the firm’s research 
reports; 

 
provided, however, that Sections I.12.a and I.12.b of this Addendum shall 
not be required with respect to quantitative or technical research reports. 

 
II. Disclosure/Transparency and Other Issues 

 



 12

1. Disclosures.  In addition to other disclosures required by rule, the firm 
must disclose prominently on the first page of any research report and 
any summary or listing of recommendations or ratings contained in 
previously-issued research reports, in type no smaller than the type used 
for the text of the report or summary or listing, that: 

 
a. “[Firm] does and seeks to do business with companies covered in 

its research reports.  As a result, investors should be aware that the 
firm may have a conflict of interest that could affect the objectivity 
of this report.” 

 
b. With respect to Covered Companies as to which the firm is 

required to make available Independent Research (as set forth in 
Section III below):  “Customers of [firm] in the United States can 
receive independent, third-party research on the company or 
companies covered in this report, at no cost to them, where such 
research is available.  Customers can access this independent 
research at [website address/hyperlink] or can call [toll-free 
number] to request a copy of this research.”   

 
c. “Investors should consider this report as only a single factor in 

making their investment decision.” 
 

2. Transparency of Analysts’ Performance.  The firm will make publicly 
available (via its website, in a downloadable format), no later than 90 
days after the conclusion of each quarter (beginning with the first full 
calendar quarter that commences at least 120 days following the entry of 
the Final Judgment), the following information, if such information is 
included in any research report (other than any quantitative or technical 
research report) prepared and furnished by the firm during the prior 
quarter:  subject company, name(s) of analyst(s) responsible for 
certification of the report pursuant to Regulation AC, date of report, 
rating, price target, period within which the price target is to be achieved, 
earnings per share forecast(s) for the current quarter, the next quarter and 
the current full year, indicating the period(s) for which such forecast(s) 
are applicable (e.g., 3Q03, FY04, etc.), and definition/explanation of 
ratings used by the firm. 

 
3. Applicability.  Except as specified in the second and third sentences of 

this Section II.3, the restrictions and requirements set forth in Section I 



 13

[Separation of Research and Investment Banking] and Section II 
[Disclosure/Transparency and Other Issues] of this Addendum will only 
apply in respect of a research report that is both (i) prepared by the firm, 
and (ii) that relates to either (A) a U.S. company, or (B) a non-U.S. 
company for which a U.S. market is the principal equity trading market; 
provided, however, that such restrictions and requirements do not apply 
to Research activities relating to a non-U.S. company until the second 
calendar quarter following the calendar quarter in which the U.S. market 
became the principal equity trading market for such company.  
Notwithstanding the foregoing, Section I.7 [Coverage] of this Addendum 
will also apply to any research report (other than the Independent 
Research made available by the firm pursuant to Section III 
[Independent, Third-Party Research] of this Addendum) that has been 
furnished by the firm to investors in the U.S., but not prepared by the 
firm, but only to the extent that the report relates to either (A) a U.S. 
company, or (B) a non-U.S. company for which a U.S. market is the 
principal equity trading market.  Also notwithstanding the foregoing, 
Section II.1 [Disclosures] of this Addendum will also apply to any 
research report (other than the Independent Research made available by 
the firm pursuant to Section III of this Addendum) that has been 
furnished by the firm to investors in the U.S., but not prepared by the 
firm, including a report that relates to a non-U.S. company for which a 
U.S. market is not the principal equity trading market, but only to the 
extent that the report has been furnished under the firm’s name, has been 
prepared for the exclusive or sole use of the firm or its customers, or has 
been customized in any material respect for the firm or its customers. 

 
a. For purposes of this Section II.3, the firm will be deemed to have 

furnished a research report to investors in the U.S. if the firm has 
made the research report available to investors in the U.S. or has 
arranged for someone else to make it available to investors in the 
U.S. 

b. For purposes of this Section II.3, a “U.S. company” means any 
company incorporated in the U.S. or whose headquarters is in the 
U.S. 

c. For purposes of this Section II.3, the calendar quarter in which a 
non-U.S. company’s “principal equity trading market” becomes the 
U.S. market is a quarter when more than 50% of worldwide trading 



 14

in the company’s common stock and equivalents (such as ordinary 
shares or common stock or ordinary shares represented by American 
Depositary Receipts) takes place in the U.S.  Trading volume shall 
be measured by publicly reported share volume.  

4. General. 
 

a. The firm may not knowingly do indirectly that which it cannot do 
directly under this Addendum. 

 
b. The firm will adopt and implement policies and procedures 

reasonably designed to ensure that its associated persons (including 
but not limited to the firm’s Investment Banking personnel) cannot 
and do not seek to influence the contents of a research report or the 
activities of Research personnel for purposes of obtaining or 
retaining investment banking business.  The firm will adopt and 
implement procedures instructing firm personnel to report 
immediately to a member of the firm’s legal or compliance staff 
any attempt to influence the contents of a research report or the 
activities of Research personnel for such a purpose. 

 
5. Timing.  Unless otherwise specified, the restrictions and requirements of 

this Addendum will be effective within 120 days of the entry of the Final 
Judgment, except that Sections I.5 [Compensation], I.6 [Evaluations], I.7 
[Coverage], I.8 [Termination of Coverage], I.9 [Prohibition on Soliciting 
Investment Banking Business], I.11 [Additional Restrictions on 
Activities by Research and Investment Banking Personnel], and II.4.a 
[General (subpart a)] and II.7 [Superseding Rules and Amendments] of 
this Addendum will be effective within 60 days of the entry of the Final 
Judgment, and Sections II.1.b [Disclosures (subpart b)] and III 
[Independent, Third-Party Research] of this Addendum will be effective 
within 270 days of the entry of the Final Judgment. 

 
6. Review of implementation. 

a. The firm will retain, at its own expense, an Independent Monitor 
acceptable to the Staff of the SEC, the NYSE, and the NASD to 
conduct a review to provide reasonable assurance of the 
implementation and effectiveness of the firm’s policies and 
procedures designed to achieve compliance with the terms of this 



 15

Addendum.  This review will begin 18 months after the date of the 
entry of the Final Judgment.  The Independent Monitor will produce a 
written report of its review, its findings as to the implementation and 
effectiveness of the firm’s policies and procedures, and its 
recommendations of other policies or procedures (or amendments to 
existing policies or procedures) as are necessary and appropriate to 
achieve compliance with the requirements and prohibitions of this 
Addendum.  The report will be produced to the firm and the Staff of 
the SEC, the NYSE and the NASD within 30 days from the 
completion of the review, but no later than 24 months from the date of 
entry of the Final Judgment.  The Independent Monitor shall have the 
option to seek an extension of time by making a written request to the 
Staff of the SEC. 

b. The firm will have a reasonable opportunity to comment on the 
Independent Monitor’s review and proposed report prior to its 
submission, including a reasonable opportunity to comment on any 
and all recommendations, and to seek confidential treatment of such 
information and recommendations set forth therein to the extent that 
the report concerns proprietary commercial and financial information 
of the firm.  This report will be subject to the protections from 
disclosure set forth in the rules of the SEC, including the protections 
from disclosure set forth in 5 U.S.C. § 552(b)(8) and 17 C.F.R. § 
200.80(b)(8), and will not constitute a record, report, statement or data 
compilation of a public office or agency under Rule 803(8) of the 
Federal Rules of Evidence. 

c. The firm will adopt all recommendations contained in the written 
report of the Independent Monitor; provided, however, that as to any 
recommendation that the firm believes is unduly burdensome or 
impractical, the firm may demonstrate why the recommended policy 
or procedure is, under the circumstances, unreasonable, impractical 
and/or not designed to yield benefits commensurate with its cost, or 
the firm may suggest an alternative policy or procedure designed to 
achieve the same objective, and submit such explanation and/or 
alternative policy or procedure in writing to the Independent Monitor 
and to the Staff of the SEC.  The firm and the Independent Monitor 
shall then attempt in good faith to reach agreement as to any policy or 
procedure as to which there is any dispute and the Independent 
Monitor shall reasonably evaluate any alternative policy or procedure 



 16

proposed by the firm.  If an agreement on any issue is not reached, the 
firm will abide by the determinations of the Staff of the SEC (which 
shall be made after allowing the firm and the Independent Monitor to 
present arguments in support of their positions), and adopt those 
recommendations the Staff of the SEC deems appropriate. 

d. The firm will cooperate fully with the Independent Monitor in this 
review, including making such non-privileged information and 
documents available, as the Independent Monitor may reasonably 
request, and by permitting and requiring the firm’s employees and 
agents to supply such non-privileged information and documents as 
the Independent Monitor may reasonably request. 

e. To ensure the independence of the Independent Monitor, the firm (i) 
shall not have the authority to terminate the Independent Monitor 
without the prior written approval of the SEC staff; and (ii) shall 
compensate the Independent Monitor, and persons engaged to assist 
the Independent Monitor, for services rendered pursuant to this Order 
at their reasonable and customary rates. 

f. For the period of engagement and for a period of three years from 
completion of the engagement, the Independent Monitor shall not 
enter into any employment, consultant, attorney-client, auditing or 
other professional relationship with the firm, or any of its present or 
former affiliates, directors, officers, employees, or agents acting in 
their capacity as such.  Any entity with which the Independent 
Monitor is affiliated or of which he/she is a member, and any person 
engaged to assist the Independent Monitor in performance of his/her 
duties under this Order shall not, without prior written consent of the 
Staff of the SEC, enter into any employment, consultant, attorney-
client, auditing or other professional relationship with the firm, or any 
of its present or former affiliates, directors, officers, employees, or 
agents acting in their capacity as such for the period of the 
engagement and for a period of three years after the engagement. 

g. Five years after the date of the entry of the Final Judgment, the firm 
shall certify to the Staff of the SEC, the NYSE, and the NASD that the 
firm has complied in all material respects with the requirements and 
prohibitions set forth in this Addendum or, in the event of material 
non-compliance, will describe such material non-compliance. 



 17

7. Superseding Rules and Amendments.  In the event that the SEC adopts a 
rule or approves an SRO rule or interpretation with the stated intent to 
supersede any of the provisions of this settlement, the SEC or SRO rule 
or interpretation will govern with respect to that provision of the 
settlement and such provision will be superseded.  In addition, each of 
the SEC, NYSE, and the NASD agrees that the SEC Staff may provide 
interpretive guidance with respect to the terms of the settlement as 
requested by the firm and that, subject to Court approval, the SEC and 
the firm may agree to amend or modify any term of the settlement, in 
each case, without any further action or involvement by any other 
regulator in any related proceeding.  With respect to any term in Section I 
or II of this Addendum that has not been superseded (as set forth above) 
within five years of the entry of the Final Judgment, it is the expectation 
of Defendant, the SEC, NYSE, and NASD that the SEC would agree to 
an amendment or modification of such term, subject to Court approval, 
unless the SEC believes such amendment or modification would not be in 
the public interest. 

 
8. Other Obligations and Requirements.  Except as otherwise specified, the 

requirements and prohibitions of this Addendum shall not relieve the firm 
of any other applicable legal obligation or requirement. 

  
III. Independent, Third-Party Research  
 

1. Obligation to Make Available.  Each year, for the period ending five 
years after the effective date of this Section III (as set forth in Section 
II.5 [Timing] of this Addendum), the firm will be required to contract 
with no fewer than three independent providers of research 
(“Independent Research Providers”) at a time in order to procure and 
make available Independent Research (as defined below) to the firm’s 
customers in the U.S. as set forth below.  The firm may satisfy this 
requirement by contracting with a consolidator that provides access to 
the Independent Research of at least three Independent Research 
Providers.  There is, however, no requirement that there be at least 
three Independent Research Providers for the Common Stock of each 
Covered Company (as those terms are defined below): 
 

a. For common stock and equivalents (such as ordinary shares or 
common stock or ordinary shares represented by American 
Depositary Receipts) listed on a U.S. national securities 



 18

exchange or quoted in Nasdaq (such securities hereinafter, 
collectively, “Common Stock”) and covered in the firm’s 
research reports (other than those limited to quantitative or 
technical research reports) (an issuer of such covered Common 
Stock hereinafter called a “Covered Company”), the firm, 
through an Independent Consultant (as discussed below) will 
use its reasonable efforts to procure, and shall make available to 
its customers in the U.S., Independent Research on such 
Covered Company’s Common Stock.  (If the Independent 
Research Providers drop coverage or do not timely pick up 
coverage of the Common Stock of a Covered Company, the 
firm will not be in violation of any of the requirements in this 
Section III, and may continue to disseminate its own research 
reports on the Common Stock of the Covered Company without 
making available any Independent Research on the Common 
Stock of the Covered Company, if the firm takes reasonable 
steps to request that the Independent Consultant procure such 
coverage promptly.) 

 
i. For purposes of this Section III, the firm’s research 

reports include research reports that have not been 
prepared by the firm, but only to the extent that such 
reports have been furnished under the firm’s name, 
have been prepared for the exclusive or sole use of the 
firm or its customers, or have been customized in any 
material respect for the firm or its customers.  

 
ii. A non-U.S. company for which a U.S. market is not the 

principal equity trading market shall only be considered 
a Covered Company if, in the calendar quarter ended 
March 31, 2004, or in any subsequent calendar quarter 
during the period that the firm’s obligations to procure 
and make available Independent Research under this 
Section III are effective, the publicly reported, average 
daily dollar volume of U.S. trading in such company’s 
Common Stock (measured by multiplying the publicly 
reported, average daily share volume of U.S. trading 
during the quarter by the closing price per share of the 
Common Stock on the last day of the quarter), exceeded 
$2.5 million, and (b) the outstanding total public float 



 19

of the Common Stock as of the last day of such 
calendar quarter exceeded $150 million, or, if the data 
necessary to calculate the outstanding total public float 
is not readily available, the market capitalization of the 
Common Stock as of the last day of such calendar 
quarter exceeded $150 million.  Further, the firm’s 
obligation to procure and make available Independent 
Research with respect to such company shall become 
effective at the later of:  (a) 90 days after the end of the 
calendar quarter in which the company met the 
foregoing trading and public float tests; or (b) the 
effective date of this Section III.         

 
b. For purposes of this Section III, Independent Research means 

(i) a research report (other than technical research reports) 
prepared by an unaffiliated person or entity, or (ii) a statistical 
or other survey or analysis of research reports (including ratings 
and price targets) issued by a broad range of persons and 
entities, including persons and entities having no association 
with investment banking activities, which survey or analysis 
has been prepared by an unaffiliated person or entity. 

 
c. The firm will adopt policies and procedures reasonably 

designed to ensure that, in connection with any solicited order 
for a customer in the U.S. relating to the Common Stock of a 
Covered Company, and if Independent Research on the 
Covered Company’s Common Stock is available, the registered 
representative will have informed the customer, during the 
solicitation, that the customer can receive Independent Research 
on the Covered Company’s Common Stock at no cost to the 
customer (the “Notice Requirement”).   

 
d. Notwithstanding the foregoing, the Notice Requirement will not 

apply to (i) the solicitation of an Institutional Customer unless 
such Institutional Customer, after due notice and opportunity, 
has advised the firm that it wishes to have the Notice 
Requirement apply to it (“Participating Institutional 
Customer”).  Any Institutional Customer who has not so 
advised the firm is hereinafter referred to as a “Non-
Participating Institutional Customer”; (ii) orders as to which 



 20

discretion was exercised by the firm, pursuant to a written 
discretionary account agreement or written grant of trading 
authorization; or (iii) a solicitation by an entity affiliated with 
the Defendant if such entity does not furnish to its customers 
research reports under the firm’s name, prepared by the firm or 
for the exclusive or sole use of the firm or its customers, or 
research reports that have been customized in any material 
respect for the firm or its customers. 

 
e. For the purposes of the notice, confirmation, and account 

statement disclosure requirements with respect to orders as to 
which discretion was exercised by an investment adviser 
pursuant to a written discretionary account agreement or written 
grant of trading authorization, the firm must treat the 
investment adviser as (regardless of whether the investment 
adviser is an institutional entity or a natural person): (i) a natural 
person, if such adviser has $1 million dollars or less invested in 
securities in the aggregate in its portfolio and/or under 
management; (ii) a Small Institutional Customer if such 
investment adviser has less than $10 million and more than $1 
million invested in securities in the aggregate in its portfolio 
and/or under management; and (iii) an Institutional Customer if 
such investment adviser has at least $10 million invested in 
securities in the aggregate in its portfolio and/or under 
management.  Notwithstanding the foregoing, nothing 
precludes the firm from providing disclosure in addition to the 
foregoing required minimum. 

 
f. With respect to a Participating Institutional Customer, the firm 

may satisfy the Notice Requirement by providing the 
Participating Institutional Customer with, instead of notice at 
the time of each solicited order, annual written notice of the 
availability of Independent Research on Covered Companies’ 
Common Stock. 

 
g. With respect to a Small Institutional Customer, the firm may 

satisfy the Notice Requirement by providing the Small 
Institutional Customer with, instead of notice at the time of 
each solicited order, annual written notice of the availability of 
Independent Research on Covered Companies’ Common Stock,21

if such Small Institutional Customer advised the firm that it 
wishes to receive such annual written notice instead of 
receiving notice at the time of each solicited order.   

 
h. Each trade confirmation sent by the Defendant to a customer 

with respect to an order as to which the Notice Requirement 
applies will set forth (or will be accompanied by a separate 
statement, which shall be considered part of the confirmation, 
that will set forth), as of the time the trade confirmation is 
generated, the ratings, if any, contained in the firm’s own 
research reports and in Independent Research procured for the 
firm with respect to the Common Stock of the Covered 
Company that is the subject of the order (the “Trade 
Confirmation Disclosure Requirement”). 

 
Notwithstanding the foregoing, the Defendant may provide a 
Small Institutional Customer with, instead of trade-by-trade 
ratings information on each confirmation, annual written notice 
of the website(s) where Independent Research ratings 
information and the firm’s ratings information can be found, if 
such Small Institutional Customer has advised the Defendant 
that it wishes to receive such annual written notice instead of 
trade-by-trade ratings information on each confirmation.  With 
respect to the Common Stock of a Covered Company, the 
website(s) shall make available separate lists setting forth (with 
respect to each of the firm’s research reports and each 
Independent Research report of each Independent Research 
Provider) the date of each research report issued by the firm and 
each IRP, respectively, the name of the issuer covered in such 
report, and the rating contained therein (if any) over the 
preceding twelve months (“Qualifying Website(s)”).   
 
If customers of the firm (other than Institutional or Small 
Institutional Customers) have access to the Qualifying 
Website(s), the Qualifying Website(s) must also provide access, 
via hyperlink, to the full text of each Independent Research 
report (regarding the Common Stock of a Covered Company) 
of each Independent Research Provider over the preceding 
twelve months.  
 



 22

With respect to a Participating Institutional Customer, the 
Defendant may satisfy the Trade Confirmation Disclosure 
Requirement by providing the Participating Institutional 
Customer with, instead of trade-by-trade ratings information on 
each confirmation, annual written notice of the Qualifying 
Website(s) where Independent Research ratings information 
and the firm’s ratings information can be found. 
 

i. Each periodic account statement sent by the Defendant to a 
customer in the U.S. that reflects a position in the Common 
Stock of a Covered Company will set forth (or will be 
accompanied by a separate statement, which shall be considered 
part of the periodic account statement, that will set forth), as of 
the end of the period covered by the statement, the ratings, if 
any, contained in the firm’s own research reports and in the 
Independent Research made available by the firm on the 
Common Stock of each such Covered Company (“Periodic 
Account Statement Disclosure Requirement”); provided, 
however, that this requirement will not apply to Non- 
Participating Institutional Customers or discretionary accounts, 
and provided further that, with respect to Participating 
Institutional Customers, the Defendant may satisfy the Periodic 
Account Statement Disclosure Requirement by providing 
Participating Institutional Customers with, instead of ratings 
information in periodic account statements, annual written 
notice of the Qualifying Website(s) where Independent 
Research ratings information and the firm’s ratings information 
can be found. 

 
Notwithstanding the foregoing, the Defendant may satisfy the 
Periodic Account Statement Disclosure Requirement by 
providing a Small Institutional Customer with, instead of 
ratings information in periodic account statements, annual 
written notice of the Qualifying Website(s) where Independent 
Research ratings information and the firm’s ratings information 
can be found, if such Small Institutional Customer has advised 
the Defendant that it wishes to receive such annual written 
notice instead of ratings information in periodic account 
statements. 

 



 23

j. The Independent Research rating(s) disclosed on trade 
confirmations and periodic account statements as set forth in 
Section III.1(h) and (i) above shall be chosen by the 
Independent Consultant.  If only one rating is disclosed by 
Defendant with respect to a particular Covered Company, it 
cannot be a consensus rating. 

  
k. Notice of the availability of Independent Research on Covered 

Companies’ Common Stock will also be included prominently 
in the periodic account statements of the Defendant’s customers 
in the U.S., in the firm’s research reports, and on the firm’s 
website.   

 
l. The firm will make the Independent Research available to its 

customers in the U.S. using, for each customer, the means of 
dissemination equivalent to those it uses to provide the 
customer with the firm’s own research reports, unless the firm 
and customer agree on another means of dissemination; 
provided, however, that nothing herein shall require or 
authorize the firm to comply with the Notice Requirement or 
make available or disseminate Independent Research at a time 
when doing so would violate Section 5 of the Securities Act of 
1933 or the other provisions of the federal securities laws or the 
rules and regulations thereunder.  If and to the extent the firm is 
able to make available or disseminate its own research reports 
on the Common Stock of a Covered Company pursuant to Rule 
137, Rule 138(a) or Rule 139(a) under the Securities Act of 
1933 and in reliance on Regulation M under the Securities 
Exchange Act of 1934, then the firm is also authorized and 
required to make available or disseminate Independent 
Research on the Common Stock of such Covered Company 
(even if the Independent Research does not meet the 
requirements of such Rule).  Notwithstanding this Section 
III.1.l, if the firm determines, because of legal, compliance or 
similar concerns, not to furnish or make available its own 
research reports on the Common Stock of a Covered Company 
for a limited period of time, it shall not be required to make 
available the Independent Research on such Covered Company 
for such period of time. 

 



 24

m. If, during the period that the firm’s obligations to procure and 
make available Independent Research under this Section III are 
effective, the firm terminates coverage of the Common Stock of 
a Covered Company, the firm, through its Independent 
Consultant, will make reasonable efforts to continue to procure 
and make available Independent Research on the Common 
Stock of such company for a period of at least 18 months after 
termination of coverage (subject to expiration of the firm’s 
obligations under this Section III). 

 
n. The firm will not be responsible or liable for (i) the procurement 

decisions of the Independent Consultant (as discussed in 
Section III.2 [Appointment of Independent Consultant to 
Oversee the Procurement of Independent Research] of this 
Addendum) with respect to the Independent Research, (ii) the 
Independent Research or its content, (iii) customer transactions, 
to the extent based on the Independent Research, or (iv) claims 
arising from or in connection with the inclusion of Independent 
Research ratings in the firm’s confirmations and periodic 
account statements or on the Qualifying Websites(s), to the 
extent such claims are based on those ratings.  The firm will not 
be required to supervise the production of the Independent 
Research procured by the Independent Consultant and will have 
no responsibility to comment on the content of the Independent 
Research.  The firm may advise its customers of the foregoing 
in its discretion. 

 
o. The Independent Consultant will not be liable for (i) its 

procurement decisions, (ii) the Independent Research or its 
content, (iii) customer transactions, to the extent based on the 
Independent Research, or (iv) claims arising from or in 
connection with the inclusion of Independent Research ratings 
in the firm’s confirmations and periodic account statements or 
on the Qualifying Websites(s), to the extent such claims are 
based on those ratings, unless the Independent Consultant has 
carried out such duties in bad faith or with willful misconduct.  
The firm will indemnify the Independent Consultant for any 
liability arising from the Independent Consultant’s good-faith 
performance of its duties as such.  

 



 25

2. Appointment of Independent Consultant to Oversee the Procurement of 
Independent Research.  Within 30 days of the entry of the Final 
Judgment, an Independent Consultant acceptable to the SEC Staff, the 
NYSE, the NASD, and the firm shall be named to oversee the 
procurement of Independent Research from Independent Research 
Providers.  The Independent Consultant will have the final authority 
(following consultation with the firm and in accordance with the criteria 
set forth in Section III.3 [Selection of Independent Research Providers] 
of this Addendum) to procure the Independent Research.  The 
Independent Consultant will not have had any significant financial 
relationship with the firm during the prior three years and may not have 
any financial relationship with the firm for three years following his or 
her work as the Independent Consultant.  The Independent Consultant’s 
fee arrangement will be subject to the approval of the Staff of the SEC, 
the NYSE, and the NASD.  In the event that an Independent Consultant 
must be replaced, the replacement shall be acceptable to the Staff of the 
SEC, the NYSE, the NASD, and the firm, and shall be subject to these 
same conditions. 

 
3. Selection of Independent Research Providers.  The Independent 

Consultant will seek to procure research reports on the Common Stock of 
all Covered Companies from Independent Research Providers.  
Independent Research Providers may not perform investment banking 
business of any kind and may not provide brokerage services in direct 
and significant competition with the firm.  In addition, the Independent 
Consultant will use the following criteria in selecting and contracting 
with Independent Research Providers to provide Independent Research. 

 
a. whether and to what extent the Independent Research Provider 

or any of its affiliates or associated persons is engaged in 
activities (including, but not limited to, activities involving 
Covered Companies or their securities), or has a business or 
other relationship with the firm or any of its affiliates or 
associated persons, that may conflict or create the appearance of 
conflict with its preparation and publication of the Independent 
Research; 

 
b. the desirability of multiple coverage of certain Covered 

Companies (e.g., by size of company, industry sector, 
companies underwritten by the firm, etc.); 



 26

 
c. the extent to which the Independent Research Provider has a 

client base and revenue stream broad enough to ensure its 
independence from the firm; 

 
d. the utility of the Independent Research Provider’s Independent 

Research to the firm’s customers, including the inclusion of 
ratings and price targets in such research and the extent to 
which the firm’s customers actually use the research; and with 
respect to surveys or analyses described above in Section 
III.1.b(ii), the extent to which the Independent Research 
provides customers with a means of comparing the firm’s 
research reports to those published by other persons and 
entities, including persons and entities having no association 
with investment banking activities;  

 
e. the quality and accuracy of the Independent Research 

Provider’s past research, including during the term of the 
Independent Consultant’s tenure; 

 
f. the experience, expertise, reputation and qualifications 

(including, as appropriate, registrations) of the Independent 
Research Provider and its personnel; and 

g. the cost of the Independent Research, especially in light of the 
five-year period set forth in Section III.1 above for the firm to 
make Independent Research available to its investing 
customers.   

 
4. Disclosure Language.  Language substantially to the effect set forth 

below may be used by the firm and its registered representatives to 
inform the firm’s customers of the availability of Independent Research: 

 
a. {Disclosure to customers as required by Section III.1.c 

[Obligation to Make Available subpart c] of this Addendum.} 
 

“There is also independent, third-party research available on 
this company, which you can get at no cost [from our 
website/hyperlink] or by calling [toll-free number], or which I 
can arrange to send to you if you would like.” 



 27

 
b. {General website and periodic customer account statement 

disclosure as required by Section III.1.k. [Obligation to Make 
Available subpart k] of this Addendum.} 

 
“Independent, third-party research on certain companies 
covered by the firm’s research is available to customers of 
[firm] in the United States at no cost.  Customers can access 
this research at [our website/hyperlink] or can call [toll-free 
number] to request that a copy of this research be sent to them.” 

 
5. Annual Reporting.  The Independent Consultant will report annually to 

the Staff of the SEC, the NYSE, and the NASD on its selection of 
Independent Research Providers, the Independent Research it has 
procured, the cost of the Independent Research it has procured to date, 
and the Independent Consultant’s fees and expenses to date.