New York Attorney General Eliot Spitzer is expected to announce today grondbreaking reforms and fines to resolve probes over conflicts of interest that have tarnished investment banks’ reputations and crushed investors’ confidence this year.
Late last night two brokerages had still not signed on to the agreement and heated negotiations by telephone and fax were ongoing. But the other major firms were on board.
Thomas Weisel Partners and U.S. Bancorp Piper Jaffray were the two holdouts regulators added.
Bear Stearns Cos., another adamant holdout from the so-called global settlement, relented and gave its verbal OK to regulators late last night, sources said.
Regulators from the Securities and Exchange Commission, National Association of Securities Dealers and state regulators banded together to scrutinize millions of e-mails and other evidence from 12 brokerages looking for compromised analysts and research reports.
The elite Wall Street firms at the heart of these multiple investigations are already on board for the landmark agreement, sources added.
Unprecedented reforms outlined in the agreement include new rules to insulate research analyts from investment bankers’ influence; a monitor to purchase independent research; the provision of independent research along with their own product; prohibitions on giving coveted initial public offering shares to company executives, and a database to track analysts’ ratings.
Total fines are expected to reach $1 billion, while fees for independent research will cost Wall Street’s elite an additional half-billion dollars, regulators said.
Citibank is set to pay $350 million; Credit Suisse First Boston $150 million; Merrill Lynch $100 million; Deutsche Bank, Morgan Stanley, J.P. Morgan Chase, Goldman Sachs, Lehman Brothers, UBS AG will pay $50 million each, sources said.
Thomas Weisel, a merchant banking boutique and U.S. Bancorp Piper Jaffray, a regional investment bank are expected to pay $20 million apiece when they settle.
Regulators say some of the most incriminating evidence of conflicts of interest emanated from these two, but that the small size of the firms and their more fragile financial position convinced regulators to lessen the fines.
Individuals are not within the scope of this global settlement.
Criminal charges, civil charges or both against former Citigroup telecom analyst Jack Grubman and other tech high-flyers may likely be leveled in the new year, state regulators said.
Frank Quattrone, Credit Suisse First Boston’s star tech banking chief, is also thought to be high on regulators’ list of wrongdoers, but well-placed sources say that regulators have given assurances to the big Swiss-owned bank that the Teflon tech banker will escape charges in the end.
“Would [they, CSFB] settle this thing without asking about [Quattrone]?” said a source close to the talks. “I don’t think so.”
However, some regulators warned that Quattrone is not off the hook yet.