Wall Street giants face SEC fines up to $500m

Click to follow
The Independent Online

Up to a dozen top Wall Street firms face fines totalling $1bn (£640m) or more, to settle conflict of interest complaints brought by federal authorities and state securities regulators – principally that they hyped the shares of client companies to win extra investment business from them.

Up to a dozen top Wall Street firms face fines totalling $1bn (£640m) or more, to settle conflict of interest complaints brought by federal authorities and state securities regulators – principally that they hyped the shares of client companies to win extra investment business from them.

The heaviest penalty, of $500m, is expected to be levied on Citigroup, the world's largest banking group, after allegations that its investment banking subsidiary Salomon Smith Barney and Salomon's disgraced former telecommunications analyst Jack Grubman, misled ordinary investors.

Details of the fines are likely to be made public within the next week, possibly as early as today. Credit Suisse First Boston is expected to have to pay $250m, while Bear Stearns, Goldman Sachs, Lehman Brothers, Deutsche Bank and UBS Warburg face payments of $75m apiece. Smaller sums, of between $50m and $60m will reportedly be sought from Thomas Weisel Partners, JP Morgan Chase and Morgan Stanley.

The punishment follows the $100m settlement agreed by Merrill Lynch to resolve an inquiry by Eliot Spitzer, the New York StateAttorney General.

The firms will also have to make structural reforms. These are likely to include the separation of research from banking. They will also have to offer clients independent research, paid for from their own resources. But even these moves may not head off massive class action lawsuits by investors. Fear of such lawsuits means the investment firms may refuse formally to accept blame, despite agreeing to the fines.

Meanwhile a federal judge in New York last night approved a partial settlement between WorldCom and federal regulators, under which the bankrupt telecoms concern will pay an unspecified fine and submit to continued government oversight. Earlier this year WorldCom filed the largest bankruptcy suit in history, after being engulfed in a $9bn accounting fraud.

Comments