Editing Global Analyst Research Settlements

{{Short description|US financial regulatory enforcement in 2003}}
The '''Global Analyst Research Settlement''' was an enforcement agreement reached in the United States on April 28, 2003, between the [[United States Securities and Exchange Commission]] (SEC), [[Financial Industry Regulatory Authority]] (NASD), [[New York Stock Exchange]] (NYSE), and ten of the [[United States]]'s largest [[Financial institution|investment firms]] to address issues of [[conflict of interest]] within their businesses in relation to recommendations made by [[financial analyst]] departments of those firms.<ref name="one">{{Citation | title= Ten of Nation's Top Investment Firms Settle Enforcement Actions Involving Conflict of Interest | date= April 28, 2003 | url= https://www.sec.gov/news/press/2003-54.htm | accessdate= July 10, 2007 | archive-date= September 24, 2014 | archive-url= https://web.archive.org/web/20140924200120/http://www.sec.gov/news/press/2003-54.htm | url-status= live }}</ref>

== Decision ==

The central issue at hand that had been [[Declaratory ruling|judged]] in court was the conflict of interest between the [[investment banking]] and [[Financial analyst|analysis]] departments of ten of the largest investment firms in the United States. The investment firms involved in the settlement had all engaged in actions and practices that had allowed the inappropriate influence of their research analysts by their investment bankers seeking lucrative fees.<ref name="one"/> A typical violation addressed by the settlement was the case of [[Credit Suisse First Boston|CSFB]] and [[Salomon Smith Barney]], which were alleged to have engaged in inappropriate spinning of "hot" [[initial public offering]]s (IPOs) and issued fraudulent research reports in violation of various sections within the [[Securities Exchange Act of 1934]]. Similarly, [[UBS Warburg]] and [[Piper Jaffray]] were alleged to have received payments for investment research without disclosing such payments in violation of the [[Securities Act of 1933]].

== Enforcement actions ==

As part of the settlement decision published on December 20, 2002, several regulations designed to prevent the abuse stemming from pressure by [[investment bankers]] on [[Financial analyst|analysts]] to provide "favorable" appraisals were instantiated. Namely, these firms would have to literally insulate their banking and analysis departments from each other physically and with [[Chinese walls]].<ref name="one"/> Additionally, budget allocation via management in research departments will be independent of investment departments. Research analysts will also be prohibited from going on pitches and roadshows with bankers during advertising and promotion of IPOs. Similarly, the Global Settlement also increased the IPO "[[Initial public offering#Quiet period|quiet period]]" from 25 days to 40 days.<ref>{{Citation | title = SEC factsheet on Global Analyst Research Settlement | date = April 28, 2003 | url = https://www.sec.gov/news/speech/factsheet.htm | accessdate = September 1, 2007 | archive-date = August 8, 2007 | archive-url = https://web.archive.org/web/20070808055620/http://www.sec.gov/news/speech/factsheet.htm | url-status = live }}</ref> Finally, research analyst's historical ratings must be disclosed and made available.

Other than these regulatory actions, the firms involved in the settlement have been required to pay fines to their investors, to fund investor education, and to pay for independent third-party market research.<ref name="one"/> A total fine of $1.435 billion was assessed and is described in the table below.<ref>{{cite web |title=SEC, NY Attorney General, NASD, NASAA, NYSE and State Regulators Announce Historic Agreement to Reform Investment Practices |publisher=Office of New York State Attorney General |date=2002-12-20 |url=http://www.oag.state.ny.us/media_center/2002/dec/dec20b_02.html |accessdate=2008-09-05 |archive-date=2009-10-15 |archive-url=https://web.archive.org/web/20091015102311/http://www.oag.state.ny.us/media_center/2002/dec/dec20b_02.html |url-status=dead }}</ref><ref>{{Cite web|url=https://dealbook.nytimes.com/2014/07/22/spitzer-returns-taking-aim-again-at-financial-analysts/|title=Spitzer Returns, Taking Aim Again at Financial Analysts|access-date=2017-03-05|archive-date=2017-12-03|archive-url=https://web.archive.org/web/20171203082755/https://dealbook.nytimes.com/2014/07/22/spitzer-returns-taking-aim-again-at-financial-analysts/|url-status=live}}</ref>

== Payments ==

{| class="wikitable"
! Name of firm
! Retrospective relief<br>($ millions)
! Independent research<br>($ millions)
! Investor education<br>($ millions)
! Total<br>($ millions)
|-
| [[Bear Stearns|Bear Stearns & Co. LLC]]
| 50
| 25
| 5
| 80
|-
| [[Credit Suisse First Boston|Credit Suisse First Boston Corp.]]
| 150
| 50
| 0
| 200
|-
| [[Deutsche Bank]]
| 50
| 25
| 5
| 80
|-
| [[Goldman Sachs]]
| 50
| 50
| 10
| 110
|-
| [[J.P. Morgan Chase|J.P. Morgan Chase & Co.]]
| 50
| 25
| 5
| 80
|-
| [[Lehman Brothers|Lehman Brothers Inc.]]
| 50
| 25
| 5
| 80
|-
| [[Merrill Lynch|Merrill Lynch & Co., Inc]]
| 100
| 75
| 25
| 200
|-
| [[Morgan Stanley]]
| 50
| 75
| 0
| 125
|-
| [[Salomon Smith Barney|Salomon Smith Barney, Inc.]]
| 300
| 75
| 25
| 400
|-
| [[UBS Warburg|UBS Warburg LLC]]
| 50
| 25
| 5
| 80
|-
! Total
! 900
! 450
! 85
! 1,435
|}

== References ==

{{reflist}}

== External links ==
* [http://www.finra.org/industry/2003-global-settlement 2003 Global Settlement] {{Webarchive|url=https://web.archive.org/web/20161024085813/http://www.finra.org/industry/2003-global-settlement |date=2016-10-24 }}

[[Category:2002 scandals]]
[[Category:2002 in the United States]]