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Wall Street Investment Firms Reach Settlement On Research Analyst Conflicts

May-13-2003

Area Corporate Finance and Securities

Summary


On April 28, 2003, settlements of enforcement actions in respect of research analyst conflicts of interest against ten Wall Street investment firms and two individual research analysts arising from joint investigations by the Attorney General for New York, the Securities and Exchange Commission ("SEC"), the National Association of Securities Dealers ("NASD"), the New York Stock Exchange ("NYSE") and state securities regulators were announced. The settlements of these actions include monetary penalties totalling approximately US$1.4 billion and the imposition of structural reforms designed to insulate research analysts from the influence of the investment banking arms of the ten firms. This client communication reviews the structural reforms contained in the settlements. The SEC intends to consider whether additional industry wide rules to deal with analyst conflicts of interest are necessary. Investment firms in Canada, as well as in the United States, should consider these structural reforms when reviewing their own practices.

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