Peter C. Harvey, Attorney General
Division of Consumer Affairs
Reni Erdos, Director
For Immediate Release:
August 26, 2004
For Further Information Contact:
Genene Morris, Jeff Lamm
Deutsche Bank Securities and Thomas Weisel Partners
Enter Into Multi-Million Dollar Agreements
New Jersey to Receive More Than $875,000 Under Terms of Agreements
NEWARK — In separate enforcement actions related to last year’s landmark multi-million dollar nationwide agreement with Wall Street investment banks, Deutsche Bank Securities, Inc., and Thomas Weisel Partners L.L.C., have agreed to revise their business practices and pay a cumulative total of $100 million to settle allegations by securities regulators that they had undue influence over research analysts resulting in conflicts of interest and deception, Attorney General Peter C. Harvey announced today. New Jersey is slated to receive more than $875,000 under the terms of the agreements.
The enforcement actions, brought by the California Department of Corporations, the U.S. Securities and Exchange Commission (“SEC”), the National Association of Securities Dealers (“NASD”), and, the New York Stock Exchange (“NYSE”), are related to a multi-million dollar global settlement that 10 other investment banks reached in 2002 and 2003 with state securities regulators as well as the SEC, NASD and NYSE.
As part of the historic settlement, 10 Wall Street investment firms paid $485.5 million dollars in civil penalties to the states. New Jersey, which co-chaired the steering committee for a multi-state task force organized by the North American Securities Administrators Association (“NASAA”) that investigated 14 of the largest investment firms beginning in April 2002, received more than $11.4 million in civil penalties. New Jersey, represented by Franklin Widmann, Chief of the New Jersey Bureau of Securities, led the states’ investigation of investment firm Bear, Stearns & Co.
The 2002-2003 settlement stemmed from joint investigations and enforcement actions initiated by regulators alleging that during a two-year period, investment banking interests had undue influence over research analysts. Evidence indicated that the researchers, who are supposed to provide objective information, were pressured to report favorably on stocks and bonds of companies that were investment banking clients of the firms.
“Investors’ nest eggs must be protected, particularly those of senior citizens,” Attorney General Harvey said. “Through this settlement and other securities action, we will make sure that investors are given honest, accurate and reliable data they can use to make informed choices about how and where to invest their money. We are dedicated to this work.”
“We are serious about rooting out abusive and unfair practices in the securities industry,” New Jersey Division of Consumer Affairs Director Reni Erdos said. “Investors deserve better and we’re working hard to ensure that investment professionals are honest in their dealings with investors.”
“Through our endeavors, we are making significant gains in an effort to reform the way investment banks do business and the influence they have over research analysts,” Bureau of Securities Chief Widmann said.
Today’s enforcement actions arise from allegations that Deutsche Bank and Thomas Weisel Partners:
In addition, securities regulators charged that Deutsche Bank failed to timely produce e-mail communications that had been requested during the investigation.
Under the terms of the separate agreements, Deutsche Bank will pay $87.5 million and Thomas Weisel Partners will pay $12.5 million. The payments will be used to cover penalties and disgorgement and to fund independent research and promote investor education. New Jersey will receive $745,585 in penalties from Deutsche Bank and $129,667 in penalties from Thomas Weisel Partners.
In addition to the monetary payments, Deutsche Bank and Thomas Weisel Partners must reform their future practices, which includes separating the research and investment banking departments at the firms, restructuring how research is reviewed and supervised and making independent research available to investors.
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