Deutsche Bank Securities and Thomas Weisel Partners will pay a combined $100-million.
By Associated Press
Published August 27, 2004
WASHINGTON - Deutsche Bank Securities has agreed to pay $87.5-million to settle allegations that it issued stock research that was biased by its investment-banking business, regulators announced Thursday, as part of a crackdown on conflicts of interest on Wall Street.
A smaller investment firm, Thomas Weisel Partners, is paying $12.5-million in a similar settlement announced by the Securities and Exchange Commission, the New York Stock Exchange, the National Association of Securities Dealers and state securities regulators.
Florida officials said they expect the state to receive more than $1-million from the settlement.
The firms are the last two in an industrywide settlement. Ten of Wall Street's biggest firms - including Citigroup, Merrill Lynch and J.P. Morgan Chase - agreed in April 2003 to pay a total of $1.4-billion following more than a year of investigations that found analysts had misled investors with stock picks designed to win firms investment-banking business.
Like the 10 others, Deutsche Bank and Thomas Weisel also are being required to dramatically change the way they do business, including severing the troublesome links between analysts' stock research and the firms' investment-banking departments.
The delay of more than a year for the settlement with Deutsche Bank was caused by its failing to promptly turn over internal e-mails during the investigation, the regulators said, and the firm is paying $7.5-million for that alleged lapse as part of the settlement.
Deutsche Bank also is paying a $25-million civil fine for alleged conflicts of interest, restitution of $25-million, $25-million to fund independent securities research and $5-million for investor education.
Thomas Weisel, based in San Francisco, is paying a $5-million fine for alleged conflicts of interest, $5-million in restitution and $2.5-million for independent research.
The firms neither admitted to nor denied the allegations. They did, however, agree to refrain from future violations and to restrict distributions of hot new stocks to favored company executives and directors, a practice known as "spinning."
From mid 1999 through mid 2001, the two firms "engaged in acts and practices that created or maintained inappropriate influence by investment banking over research analysts, thereby imposing conflicts of interest on research analysts that the firms failed to manage in an adequate or appropriate manner," the regulators said.
The firms "issued research reports that were not based on principles of fair dealing and good faith, and did not provide a sound basis for evaluating facts, contained exaggerated or unwarranted claims about the covered companies, and/or contained opinions for which there were no reasonable bases."
Half of the fines and restitution being paid by the two firms will go into a fund for their customers; the other half will go to state securities regulators.
