Posted on 10/23/2002 4:06:29 AM PDT by Liz
Wall Street's top 10 firms are descending on Washington tomorrow to hear proposals from federal and state regulators who've been probing their conflicts of interest for months.
The firms, including Goldman Sachs and Citigroup, are sending their top lawyers to Washington to hear proposals from the Securities and Exchange Commission and the New York attorney general's office about ways to change how they conduct stock market research.
The two sides are meeting as a single group for the first time. They hope to work towards a framework to separate research from investment banking that works for all of them.
"That's very refreshing," said William Benedetto, chairman of Benedetto, Gartland, a boutique investment bank. "It's got the potential for a practical resolution of the issue of how to find the appropriate checks and balances between research and investment banking."
Wall Street research has come under intense scrutiny in the last year, as investigators found that some analysts pumped up stocks of investment banking clients while others funneled hot stocks to those clients.
Attorney general Eliot Spitzer turned up e-mails at Merrill Lynch which showed some analysts publicly supported companies they privately criticized. Without admitting wrongdoing, Merrill settled for $100 million.
The discussions tomorrow are unlikely to include specific penalties.
Salomon Smith Barney, which is facing allegations that former star telecom analyst Jack Grubman directed hot stocks to company execs, and Credit Suisse First Boston will both likely face some fines, experts said.
At the talks tomorrow, which will include securities officials from Massachusetts and Utah, regulators are expected to present proposals and solicit feedback.
The firms already have some differences of opinion.
Morgan Stanley is unwilling to pay a fine if it didn't do anything wrong, people familiar with the firm said. The company also doesn't want to give up its research department.
Wall Street bankers said researchers can help screen potential clients, helping their firms calculate how a prospect would be received if it sold stock to the public.
Those who plan to attend the meeting hope the two sides can agree soon on a new set of rules that will reform Wall Street and restore public confidence in the markets.
Deutsche Bank, Merrill Lynch, UBS Warburg, Lehman Brothers, Bear Stearns, Morgan Stanley, J.P. Morgan Chase, Citigroup, Goldman Sachs, and Credit Suisse First Boston are all expected to send their general counsel or top lawyers.
Regulators and company officials declined comment.
Here's an idea. Don't listen to ANY investment advice from Wall Street.
Agreed. Any settlement, short of complete divestment of the research unit (not saying I advocate the government forcing this) will fail to remove the conflict of interest problem. I suspect that all these settlements will have the unintended consequence of making investors rely even more on the research which will still be biased and still be no more useful than randonly thowing darts at the Wall Street Journal.
Why would anyone expect unbiased advice from an investment bank? When these investors buy a car, do they expect a Cadillac dealer to give them unbiased opinions on the Cadillac vs. a Lexus?
The FIX is in !!!!
Let me guess, Jack Quinn (Marc Rich's attorney)will be making the necessary arrangements for all the "usual suspects"
I see there is a summit meeting in Washington D.C. of our top white collar organized crime syndicates which means our elected and appointed officials will be standing in line to receive corporate donations to make all this wrong doing go away.
Ironic that there is currently a request before a federal judge in New York asking that federal criminal indictments be brought against Goldman Sachs for alleged racketeering for offering assets bought from an alleged organized crime syndicate and then bundled into an IPO.
Exactly. Who would spend thousands of dollars for dog and pony shows, golf outings etc to garner investment banking business and turn around and say something bad about the company's stock before you've had the opportunity to make a couple of million selling it? What a joke.
Right on target except that the fix HAS been in ever since Spitzer accepted 100 million from MER to make "their probems" go away. It is all about appearing to be tough on the Wall Street criminals while doing very little. NO criminal charges will be filed. So the message is that it is okay to rob the public as long as you give the lawyers and politicians a cut of the take. It is a disgrace.
Richard W.
..Hmm..."a framework...that works for all of THEM"....how about something that works for US!!....something that looks out for OUR interests as individual investors....
Good luck to everybody!!
Stonewalls
Richard W.
Dream on fellow FReeper......
Exactly. Anybody who does a little research and backtesting can figure out that listening to sell-side analysts is a bad idea. This is a case of the government spending millions of our dollars to make it look like it is doing something, under the assumption that all investors are incredibly stupid.
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