SEC likely to vote today on Wall St. settlement

$1.4 billion to settle claims against 10 big companies

April 22, 2003|By BLOOMBERG NEWS

WASHINGTON - The Securities and Exchange Commission is reviewing a proposed settlement of claims that 10 Wall Street firms misled investors with biased stock research, SEC Commissioner Roel C. Campos said yesterday.

Campos said the five commissioners received the terms of the proposed $1.4 billion settlement last week. The SEC plans to vote on the settlement today at a closed meeting, said a person familiar with the negotiations.

"There's a lot of materials to go through," Campos told reporters after a speech.

SEC approval would be one of the last steps for cementing an agreement that state and federal regulators reached in December with Citigroup Inc., the world's largest financial services company; Merrill Lynch & Co. Inc., the biggest securities firm; and eight other firms. After clearing the SEC, the agreement still would need approval from a federal judge.

The scheduling of a vote indicates that the Wall Street firms and regulators have agreed to final terms "as opposed to concepts that have to be negotiated later," said John C. Coffee Jr., a Columbia University securities law professor.

"What the terms of that deal are still remains a question," Coffee said. "And even with the terms, there remains the question" of how independent in-house stock analysts will be in the future.

New York state Attorney General Eliot Spitzer and other regulators alleged that to win banking business, the banks' analysts promoted stocks of investment banking clients to investors while privately disparaging those stocks.

Other firms in the settlement are Credit Suisse First Boston, Bear Stearns Cos., Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Lehman Brothers Holdings Inc., Morgan Stanley, UBS Warburg LLC and U.S. Bancorp.

An 11th firm, Deutsche Bank AG, was earlier scheduled to be part of the settlement but was held back by its failure to produce e-mail relating to its analysts' recommendations, California regulators said.

Bringing the settlement to a vote now shows that the SEC's new chairman, William H. Donaldson, "wants to clear the decks," said Patrick S. McGurn, senior vice president of Institutional Shareholder Services.

Donaldson's main issues upon joining the SEC, McGurn said, were naming the head of an auditor oversight panel - accomplished last week - and completing the settlement.

The terms of the settlement, particularly any allegations of fraud by the firms, will be watched to see if they spur new litigation by investors, Coffee said.

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