Securities and Exchange Commission
Litigation Release No. 18109 / April 28, 2003
Securities and Exchange Commission v. Bear, Stearns & Co. Inc., 03 CV
2937 (WHP) (S.D.N.Y.)
SEC SUES BEAR STEARNS 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 Bear, Stearns & Co. 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, Bear Stearns
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,
Bear Stearns 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, Bear Stearns 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 Bear Stearns 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 Bear Stearns were subject to
inappropriate influence by investment banking at the firm. The
Complaint also alleges that Bear Stearns published exaggerated or
unwarranted research or research that lacked a reasonable basis, made
a payment to another firm for that firm to publish research on a Bear
Stearns' underwriting client without ensuring that such payment was
disclosed, and failed to maintain appropriate supervision over its
research and investment banking operations.
SNIPPETS:
Securities and Exchange Commission v. Bear,
SEC SUES BEAR STEARNS FOR RESEARCH ANALYST CONFLICTS OF INTEREST FIRM TO SETTLE WITH SEC,
Inc., a New York-based brokerage firm and investment bank, arising from an investigation of
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.
Bear Stearns has agreed to a federal court order that will enjoin the firm from future
In addition, Bear Stearns will pay, over five years, $25 million to provide the firm's
In connection with this matter, the Commission today filed a Complaint against Bear Stearns
According to the Commission's Complaint, from at least July 1999 through June 2001, research
The Complaint also alleges that Bear Stearns published exaggerated or unwarranted research or
Specifically, the Commission's Complaint alleges that * Bear Stearns' analysts were expected
For example, in e-mails + An analyst characterized the stock of Micromuse, Inc., a stock
+ In an e-mail to an investment banker, an analyst stated that he felt "compromised" due to
The final judgment also orders the firm to make the payments described above, and provides
In addition, the final judgment orders Bear Stearns to implement structural reforms and
In addition, Bear Stearns must disclose on the first page of each research report whether the
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