2003-10-31 SEC Press press_release 18 KB 5,627 chars

Federal Court Approves Settlement of SEC Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking

Release
2003-144
Source PDF JSON
summary

The SEC secured a $1.4 billion global settlement with ten top investment firms and two individuals, Jack Grubman and Henry Blodget, for allowing investment banking interests to improperly influence securities research, resulting in $894 million in penalties and disgorgement and structural reforms.

paragraph

The SEC announced a $1.4 billion global settlement approved by a federal court, resolving enforcement actions against ten major investment firms and two analysts for allowing investment banking interests to improperly influence securities research. The defendants collectively paid $894 million in penalties and disgorgement, with $397 million in disgorgement and $497 million in penalties, and committed $432.5 million to fund independent research for investors. Seven firms also paid $80 million each to fund and promote investor education programs as part of the resolution.

narrative

The SEC announced a $1.4 billion global settlement approved by a federal court, resolving enforcement actions against ten major investment firms and two analysts, Jack Grubman and Henry Blodget, for allowing investment banking interests to improperly influence securities research. The enforcement actions alleged that analysts issued overly optimistic research reports to win or retain investment banking business despite private doubts about companies' prospects. The defendants collectively paid $894 million in penalties and disgorgement, consisting of $397 million in disgorgement and $497 million in penalties, and committed $432.5 million to fund independent research for investors. Seven firms additionally paid $80 million each to fund and promote investor education programs. In addition to the monetary payments, the firms were required to implement dramatic structural reforms, specifically the separation of their research and investment banking departments. The settlement also established Distribution Funds and an Investor Education Fund to provide proceeds to eligible investors and support cost-efficient investor education programs. U.S. District Judge William H. Pauley III ultimately approved the settlement, which the SEC believed was an important step toward restoring investors' faith in the fairness and integrity of the markets.

Enriched metadata

Scheme
other
Court
Southern District of New York
Settlement
$894,000,000
Disgorgement
$397,000,000
Classified other. No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →
Parties
Securities and Exchange CommissionBear Stearns & Co. Inc.Citigroup Global Markets Inc.Jack Benjamin GrubmanCredit Suisse First Boston LLCGoldman, Sachs & Co.J.P. Morgan Securities Inc.Lehman Brothers Inc.Merrill Lynch, Pierce, Fenner & Smith IncorporatedHenry M. BlodgetMorgan Stanley & Co. IncorporatedUBS Securities LLCU.S. Bancorp Piper Jaffray Inc.
Keywords
federal approvesapproves settlementenforcement actionsactions involvinginvolving conflictsconflicts interestinterest researchresearch investmentinvestment bankingfederalapprovessettlementsecenforcementactions

Exhibits & Attached Documents (31)

Extracted insights

Dollar amounts 7
  • $1.40B $1.4 billion ≥$1B
  • $894.00M $894 million $100M–$1B
  • $497.00M $497 million $100M–$1B
  • $432.50M $432.5 million $100M–$1B
  • $397.00M $397 million $100M–$1B
  • $100.00M $100 million $100M–$1B
  • $80.00M $80 million $10M–$100M
Entities 12
  • company Bear Stearns & Co. Inc.
  • company Citigroup Global Markets Inc.
  • company Credit Suisse First Boston LLC
  • company Goldman, Sachs & Co.
  • person Henry M. Blodget
  • person Jack Benjamin Grubman
  • company J.P. Morgan Securities Inc.
  • company Lehman Brothers Inc.
  • company Merrill Lynch, Pierce, Fenner & Smith Incorporated
  • company Morgan Stanley & Co. Incorporated
  • company UBS Securities LLC
  • company U.S. Bancorp Piper Jaffray Inc.
PDF (from attached: judgment)
in this action (“Complaint”) and Defendant Bear, Steams · Source
Text layers
Extracted body text (5,627c) 
Federal Court Approves Settlement of SEC Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking FOR IMMEDIATE RELEASE2003-144Washington, D.C., Oct. 31, 2003 -- The Securities and Exchange Commission announced today that the Honorable William H. Pauley III, United States District Judge for the Southern District of New York, approved the $1.4 billion global settlement of enforcement actions against ten of the nation's top investment firms and two associated individuals. The enforcement actions alleged undue influence of investment banking interests on securities research at brokerage firms. The enforcement actions and the proposed settlements were announced on April 28, 2003.In addition to entering the Order approving the global settlement, the Court also entered orders as to certain of the firms relating to the Distribution Funds and the Investor Education Fund. These orders provide further details as to investors who may be eligible to receive proceeds from the Distribution Funds to be created as part of the global settlement and set forth a framework for a non-profit organization to fund worthy and cost-efficient investor education programs. The Court also entered separate Final Judgments as to each of the 12 defendants.SEC Chairman William H. Donaldson said, "The Commission is pleased that the Court, after having conducted a thorough review of the proposed global settlement, has approved the settlement and found it to be in the public interest. We now begin the process of implementing the settlement, which we believe is an important part of our ongoing efforts to restore investors' faith in the fairness and integrity of our markets."Under the terms of the Final Judgments and Orders that Judge Pauley approved today, the ten firms and two individuals will pay a total of $894 million in penalties and disgorgement, consisting of $397 million in disgorgement and $497 million in penalties, which includes one firm's previous payment of $100 million in connection with its prior settlement with the states.The Final Judgments also require the firms to make payments totaling $432.5 million to fund independent research for investors. Seven of the firms will make payments of $80 million to fund and promote investor education. In addition to the monetary payments, the firms are required to undertake dramatic reforms to their future practices, including separating their research and investment banking departments.Information by CompanyBear, Stearns & Co. Inc.SEC Final Judgment, SEC v. Bear, Stearns & Co. Inc. Final Judgment Appendix AFinal Judgment Appendix BBear Stearns Investor Education OrderBear Stearns Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8320)Citigroup Global Markets Inc., f/k/a Salomon Smith Barney Inc.;Jack Benjamin GrubmanCitigroup Global MarketsSEC Final Judgment, SEC v. Citigroup Global Markets Inc. Final Judgment Appendix AFinal Judgment Appendix BCitigroup Global Markets Investor Education OrderCitigroup Global Markets Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8322)Order Granting Waiver (Release Nos. 33-8321, 34-48726)Jack B. GrubmanSEC Final Judgment, SEC v. Jack Benjamin GrubmanCredit Suisse First Boston LLC, f/k/a Credit Suisse First Boston CorporationSEC Final Judgment, SEC v. Credit Suisse First Boston LLC Final Judgment Appendix AFinal Judgment Appendix BCredit Suisse First Boston Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8324)Order Granting Waiver (Release No. 33-8323)Goldman, Sachs & Co.SEC Final Judgment, SEC v. Goldman, Sachs & Co. Final Judgment Appendix AFinal Judgment Appendix BGoldman Sachs Investor Education OrderGoldman Sachs Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8332)J.P. Morgan Securities Inc.SEC Final Judgment, SEC v. J.P. Morgan Securities Inc. Final Judgment Appendix AFinal Judgment Appendix BJ.P. Morgan Investor Education OrderJ.P. Morgan Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8330)Lehman Brothers Inc.SEC Final Judgment, SEC v. Lehman Brothers Inc. Final Judgment Appendix AFinal Judgment Appendix BLehman Brothers Investor Education OrderLehman Brothers Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8331)Merrill Lynch, Pierce, Fenner & Smith Incorporated; Henry M. BlodgetMerrill Lynch, Pierce, Fenner & Smith IncorporatedSEC Final Judgment, SEC v. Merrill Lynch, Pierce, Fenner & Smith Incorporated Final Judgment Appendix AFinal Judgment Appendix BMerrill Lynch Investor Education OrderOrder Granting Waiver (Release No. 33-8319)Order Granting Waiver (Release Nos. 33-8318, 34-48723)Henry M. BlodgetHenry M. BlodgetSEC Final Judgment, SEC v. Henry M. BlodgetMorgan Stanley & Co. IncorporatedSEC Final Judgment, SEC v. Morgan Stanley & Co. Incorporated Final Judgment Appendix AFinal Judgment Appendix BMorgan Stanley Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8325)UBS Securities LLC, f/k/a UBS Warburg LLCSEC Final Judgment, SEC v. UBS Warburg LLC Final Judgment Appendix AFinal Judgment Appendix BUBS Securities Investor Education OrderUBS Securities Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8327)Order Granting Waiver (Release Nos. 33-8326, 34-48728)U.S. Bancorp Piper Jaffray Inc.SEC Final Judgment, SEC v. U.S. Bancorp Piper Jaffray Inc. Final Judgment Appendix AFinal Judgment Appendix BPiper Jaffray Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8329)Order Granting Waiver (Release Nos. 33-8328, 34-48729)See Also: Litigation Release 18438 Last modified: 10/31/2003
OCR text (5,627c · plain-text · 99% conf) 
Federal Court Approves Settlement of SEC Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking FOR IMMEDIATE RELEASE2003-144Washington, D.C., Oct. 31, 2003 -- The Securities and Exchange Commission announced today that the Honorable William H. Pauley III, United States District Judge for the Southern District of New York, approved the $1.4 billion global settlement of enforcement actions against ten of the nation's top investment firms and two associated individuals. The enforcement actions alleged undue influence of investment banking interests on securities research at brokerage firms. The enforcement actions and the proposed settlements were announced on April 28, 2003.In addition to entering the Order approving the global settlement, the Court also entered orders as to certain of the firms relating to the Distribution Funds and the Investor Education Fund. These orders provide further details as to investors who may be eligible to receive proceeds from the Distribution Funds to be created as part of the global settlement and set forth a framework for a non-profit organization to fund worthy and cost-efficient investor education programs. The Court also entered separate Final Judgments as to each of the 12 defendants.SEC Chairman William H. Donaldson said, "The Commission is pleased that the Court, after having conducted a thorough review of the proposed global settlement, has approved the settlement and found it to be in the public interest. We now begin the process of implementing the settlement, which we believe is an important part of our ongoing efforts to restore investors' faith in the fairness and integrity of our markets."Under the terms of the Final Judgments and Orders that Judge Pauley approved today, the ten firms and two individuals will pay a total of $894 million in penalties and disgorgement, consisting of $397 million in disgorgement and $497 million in penalties, which includes one firm's previous payment of $100 million in connection with its prior settlement with the states.The Final Judgments also require the firms to make payments totaling $432.5 million to fund independent research for investors. Seven of the firms will make payments of $80 million to fund and promote investor education. In addition to the monetary payments, the firms are required to undertake dramatic reforms to their future practices, including separating their research and investment banking departments.Information by CompanyBear, Stearns & Co. Inc.SEC Final Judgment, SEC v. Bear, Stearns & Co. Inc. Final Judgment Appendix AFinal Judgment Appendix BBear Stearns Investor Education OrderBear Stearns Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8320)Citigroup Global Markets Inc., f/k/a Salomon Smith Barney Inc.;Jack Benjamin GrubmanCitigroup Global MarketsSEC Final Judgment, SEC v. Citigroup Global Markets Inc. Final Judgment Appendix AFinal Judgment Appendix BCitigroup Global Markets Investor Education OrderCitigroup Global Markets Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8322)Order Granting Waiver (Release Nos. 33-8321, 34-48726)Jack B. GrubmanSEC Final Judgment, SEC v. Jack Benjamin GrubmanCredit Suisse First Boston LLC, f/k/a Credit Suisse First Boston CorporationSEC Final Judgment, SEC v. Credit Suisse First Boston LLC Final Judgment Appendix AFinal Judgment Appendix BCredit Suisse First Boston Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8324)Order Granting Waiver (Release No. 33-8323)Goldman, Sachs & Co.SEC Final Judgment, SEC v. Goldman, Sachs & Co. Final Judgment Appendix AFinal Judgment Appendix BGoldman Sachs Investor Education OrderGoldman Sachs Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8332)J.P. Morgan Securities Inc.SEC Final Judgment, SEC v. J.P. Morgan Securities Inc. Final Judgment Appendix AFinal Judgment Appendix BJ.P. Morgan Investor Education OrderJ.P. Morgan Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8330)Lehman Brothers Inc.SEC Final Judgment, SEC v. Lehman Brothers Inc. Final Judgment Appendix AFinal Judgment Appendix BLehman Brothers Investor Education OrderLehman Brothers Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8331)Merrill Lynch, Pierce, Fenner & Smith Incorporated; Henry M. BlodgetMerrill Lynch, Pierce, Fenner & Smith IncorporatedSEC Final Judgment, SEC v. Merrill Lynch, Pierce, Fenner & Smith Incorporated Final Judgment Appendix AFinal Judgment Appendix BMerrill Lynch Investor Education OrderOrder Granting Waiver (Release No. 33-8319)Order Granting Waiver (Release Nos. 33-8318, 34-48723)Henry M. BlodgetHenry M. BlodgetSEC Final Judgment, SEC v. Henry M. BlodgetMorgan Stanley & Co. IncorporatedSEC Final Judgment, SEC v. Morgan Stanley & Co. Incorporated Final Judgment Appendix AFinal Judgment Appendix BMorgan Stanley Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8325)UBS Securities LLC, f/k/a UBS Warburg LLCSEC Final Judgment, SEC v. UBS Warburg LLC Final Judgment Appendix AFinal Judgment Appendix BUBS Securities Investor Education OrderUBS Securities Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8327)Order Granting Waiver (Release Nos. 33-8326, 34-48728)U.S. Bancorp Piper Jaffray Inc.SEC Final Judgment, SEC v. U.S. Bancorp Piper Jaffray Inc. Final Judgment Appendix AFinal Judgment Appendix BPiper Jaffray Distribution Fund Plan OrderOrder Granting Waiver (Release No. 33-8329)Order Granting Waiver (Release Nos. 33-8328, 34-48729)See Also: Litigation Release 18438 Last modified: 10/31/2003

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