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

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 Company

Bear, Stearns & Co. Inc.

• SEC Final Judgment, SEC v. Bear, Stearns & Co. Inc.
  • Final Judgment Appendix A
  • Final Judgment Appendix B
• Bear Stearns Investor Education Order
• Bear Stearns Distribution Fund Plan Order
• Order Granting Waiver (Release No. 33-8320)

Citigroup Global Markets Inc., f/k/a Salomon Smith Barney Inc.;
Jack Benjamin Grubman

• SEC Final Judgment, SEC v. Citigroup Global Markets Inc.
  • Final Judgment Appendix A
  • Final Judgment Appendix B
• Citigroup Global Markets Investor Education Order
• Citigroup Global Markets Distribution Fund Plan Order
• Order Granting Waiver (Release No. 33-8322)
• Order Granting Waiver (Release Nos. 33-8321, 34-48726)

• SEC Final Judgment, SEC v. Jack Benjamin Grubman

Credit Suisse First Boston LLC, f/k/a Credit Suisse First Boston Corporation

• SEC Final Judgment, SEC v. Credit Suisse First Boston LLC
  • Final Judgment Appendix A
  • Final Judgment Appendix B
• Credit Suisse First Boston Distribution Fund Plan Order
• Order 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 A
  • Final Judgment Appendix B
• Goldman Sachs Investor Education Order
• Goldman Sachs Distribution Fund Plan Order
• Order Granting Waiver (Release No. 33-8332)

J.P. Morgan Securities Inc.

• SEC Final Judgment, SEC v. J.P. Morgan Securities Inc.
  • Final Judgment Appendix A
  • Final Judgment Appendix B
• J.P. Morgan Investor Education Order
• J.P. Morgan Distribution Fund Plan Order
• Order Granting Waiver (Release No. 33-8330)

Lehman Brothers Inc.

• SEC Final Judgment, SEC v. Lehman Brothers Inc.
  • Final Judgment Appendix A
  • Final Judgment Appendix B
• Lehman Brothers Investor Education Order
• Lehman Brothers Distribution Fund Plan Order
• Order Granting Waiver (Release No. 33-8331)

Merrill Lynch, Pierce, Fenner & Smith Incorporated; Henry M. Blodget

• SEC Final Judgment, SEC v. Merrill Lynch, Pierce, Fenner & Smith Incorporated
  • Final Judgment Appendix A
  • Final Judgment Appendix B
• Merrill Lynch Investor Education Order
• Order Granting Waiver (Release No. 33-8319)
• Order Granting Waiver (Release Nos. 33-8318, 34-48723)

• Henry M. Blodget
• SEC Final Judgment, SEC v. Henry M. Blodget

Morgan Stanley & Co. Incorporated

• SEC Final Judgment, SEC v. Morgan Stanley & Co. Incorporated
  • Final Judgment Appendix A
  • Final Judgment Appendix B
• Morgan Stanley Distribution Fund Plan Order
• Order Granting Waiver (Release No. 33-8325)

UBS Securities LLC, f/k/a UBS Warburg LLC

• SEC Final Judgment, SEC v. UBS Warburg LLC
  • Final Judgment Appendix A
  • Final Judgment Appendix B
• UBS Securities Investor Education Order
• UBS Securities Distribution Fund Plan Order
• Order 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 A
  • Final Judgment Appendix B
• Piper Jaffray Distribution Fund Plan Order
• Order Granting Waiver (Release No. 33-8329)
• Order Granting Waiver (Release Nos. 33-8328, 34-48729)