Securities and Exchange Commission
Litigation Release No. 18116 / April 28, 2003
Securities and Exchange Commission v. Lehman Brothers Inc., 03 CV 2940
(WHP) (S.D.N.Y.)
SEC SUES LEHMAN BROTHERS FOR RESEARCH ANALYST CONFLICTS OF INTEREST
FIRM TO SETTLE WITH SEC, NASD, NYSE, NEW YORK ATTORNEY GENERAL, AND
STATE REGULATORS
The Securities and Exchange Commission announced today that it has
settled charges against Lehman Brothers Inc., a New York-based
brokerage firm and investment bank, arising from an investigation of
research analyst conflicts of interest. This settlement, and
settlements with nine other brokerage firms, are part of the global
settlement the firms have reached with the Commission, NASD, Inc., the
New York Stock Exchange, Inc. ("NYSE"), the New York Attorney General,
and other state regulators. As part of the settlement, Lehman has
agreed to pay $25 million as disgorgement and an additional $25
million in penalties. One-half of the total of these payments -- $25
million -- will be paid in connection with the SEC action and related
proceedings by the NASD and NYSE and will be placed into a
distribution fund for the benefit of customers of the firm. The
remainder will be paid to resolve related proceedings by state
regulators. In the SEC action, Lehman has agreed to a federal court
order that will enjoin the firm from future violations of NASD and
NYSE rules and require the firm to make changes in the operations of
its equity research and investment banking departments. In addition,
Lehman will pay, over five years, $25 million to provide the firm's
clients with independent research, and $5 million to be used for
investor education.
In connection with this matter, the Commission today filed a Complaint
against Lehman in the U.S. District Court for the Southern District of
New York, alleging violations of NASD and NYSE rules. According to the
Commission's Complaint, from at least July 1999 through June 2001,
research analysts at Lehman were subject to inappropriate influence by
investment banking at the firm. The Complaint also alleges that Lehman
published exaggerated or unwarranted research or research that lacked
a reasonable basis and failed to maintain appropriate supervision over
its research and investment banking operations.
Specifically, the Commission's Complaint alleges that
* Lehman tied the financial compensation of analysts directly and
indirectly to the analyst's success in generating investment
banking revenue from public companies. Six of Lehman's
approximately 100 senior research analysts had employment
SNIPPETS:
Securities and Exchange Commission v. Lehman Brothers Inc.,
SEC SUES LEHMAN BROTHERS FOR RESEARCH ANALYST CONFLICTS OF INTEREST FIRM TO SETTLE WITH SEC,
The Securities and Exchange Commission announced today that it has settled charges against
This settlement, and settlements with nine other brokerage firms, are part of the global
One-half of the total of these payments -- $25 million -- will be paid in connection with the
Lehman has agreed to a federal court order that will enjoin the firm from future violations
In connection with this matter, the Commission today filed a Complaint against Lehman in the
According to the Commission's Complaint, from at least July 1999 through June 2001, research
The Complaint also alleges that Lehman published exaggerated or unwarranted research or
the Commission's Complaint alleges that * Lehman tied the financial compensation of analysts
Lehman used the promise of future research coverage to obtain valuable IPO underwriting
* In at least five instances, the financial incentives and pressure on analysts to assist in
E-mail exchanges between analysts and their supervisors, or analysts and institutional
The final judgment also orders the firm to make the payments described above, and provides
In addition, the final judgment orders Lehman to implement structural reforms and provide
In addition, Lehman must disclose on the first page of each research report whether the firm
Lehman also has agreed as part of this settlement to retain, at its own expense, an
This review will be conducted eighteen months after the date of the entry of the Final
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