Securities and Exchange Commission
Litigation Release No. 18114 / April 28, 2003
Securities and Exchange Commission v. J.P. Morgan Securities Inc., 03
CV 2939 (WHP) (S.D.N.Y.)
SEC SUES J.P. MORGAN FOR RESEARCH ANALYST CONFLICTS OF INTEREST FIRM
TO SETTLE WITH SEC, NASD, NYSE, NY ATTORNEY GENERAL, AND STATE
REGULATORS
The Securities and Exchange Commission announced today that it has
settled charges against J.P. Morgan Securities 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, J.P. Morgan 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,
J.P. Morgan 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, J.P. Morgan 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 J.P. Morgan 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 J.P. Morgan were subject to
inappropriate influence by investment banking at the firm. The
Complaint also alleges that J.P. Morgan made payments to other firms
for those firms to publish research on J.P. Morgan's underwriting
clients without ensuring that such payments were disclosed and failed
to maintain appropriate supervision over its research and investment
banking operations.
Specifically, the Commission's Complaint alleges that
SNIPPETS:
Securities and Exchange Commission v. J.P. Morgan Securities Inc.,
SEC SUES J.P. MORGAN 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 SEC
The remainder will be paid to resolve related proceedings by state regulators.
J.P. Morgan has agreed to a federal court order that will enjoin the firm from future
According to the Commission's Complaint, from at least July 1999 through June 2001, research
The Complaint also alleges that J.P. Morgan made payments to other firms for those firms to
For a period of time in 2000, the head of research at J.P. Morgan reported both to the head
During this same period, analysts at one of J.P. Morgan's predecessor firms, Chase H&Q, were
Given how thoroughly we just got screwed on IRF, is not interested in hearing stories about
The final judgment also orders the firm to make the payments described above, and provides
In addition, the final judgment orders J.P. Morgan to implement structural reforms and
In addition, J.P. Morgan must disclose on the first page of each research report whether the
J.P. Morgan also has agreed as part of this settlement to retain, at its own expense, an
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