Securities and Exchange Commission
Litigation Release No. 18111 / April 28, 2003
Securities and Exchange Commission v. Citigroup Global Markets Inc.,
f/k/a Salomon Smith Barney Inc., 03 CV 2945 (WHP) (S.D.N.Y.)
Securities and Exchange Commission v. Jack Benjamin Grubman, 03 CV
2938 (WHP) (S.D.N.Y.)
SEC SUES CITIGROUP GLOBAL MARKETS, FORMERLY KNOWN AS SALOMON SMITH
BARNEY, AND FORMER RESEARCH ANALYST JACK B. GRUBMAN FOR RESEARCH
ANALYST CONFLICTS OF INTEREST
FIRM TO SETTLE WITH SEC, NASD, NYSE, NY ATTORNEY GENERAL, AND STATE
REGULATORS; GRUBMAN TO SETTLE WITH SEC, NASD, NYSE, AND NY ATTORNEY
GENERAL
The Securities and Exchange Commission announced today that it has
settled charges against Citigroup Global Markets Inc., formerly known
as Salomon Smith Barney Inc. ("SSB"), 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, SSB has agreed to pay
$150 million as disgorgement and an additional $150 million in
penalties. One-half of the total of these payments - $150 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,
SSB has agreed to a federal court order that will enjoin the firm from
future violations of the federal securities laws and NASD and NYSE
rules and require the firm to make changes in the operations of its
equity research and investment banking departments. In addition, SSB
will pay, over five years, $75 million to provide the firm's clients
with independent research, and $25 million to be used for investor
education.
The Commission also announced today that it has settled charges
against Jack B. Grubman, formerly a research analyst at Salomon Smith
Barney, arising from an investigation of his research on companies in
the telecommunications ("telecom") sector. As part of the settlement,
Grubman has agreed to pay $7.5 million as disgorgement and an
additional $7.5 million in penalties. One-half of the total of these
payments - $7.5 million - will be paid in connection with the SEC
SNIPPETS:
Securities and Exchange Commission
Securities and Exchange Commission v. Jack Benjamin Grubman,
FIRM TO SETTLE WITH SEC, NASD, NYSE, NY ATTORNEY GENERAL, AND STATE REGULATORS; GRUBMAN TO
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 - $150 million will be paid in connection with the
The remainder will be paid to resolve related proceedings by state regulators.
SSB has agreed to a federal court order that will enjoin the firm from future violations of
One-half of the total of these payments - $7.5 million - will be paid in connection with the
In connection with these matters, the Commission today filed separate Complaints against SSB
According to the Commission's Complaints, from 1999 through 2001, research analysts at SSB -
The Complaints also allege that SSB and Grubman published false or misleading research
The Complaint against SSB further alleges that the firm engaged in "spinning" of hot initial
the Commission's Complaints allege that * Research analysts at SSB were expected to promote
These business practices created a culture in which investment bankers could and did pressure
SSB earned approximately $790 million in investment banking fees from companies in the
These reports were contrary to the true views that Grubman and another analyst on his team
+ On February 21, 2001, Grubman issued a note on Focal that "reiterated" a 1 recommendation
In addition, SSB must disclose on the first page of each research report whether the firm
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