September 01, 2004
"The settlements result from allegations of conflicts of interest at brokerage houses where analysts recommended stocks due to improper influence from their investment banking colleagues," said Mark Davis, Director of the Division of Banking, Securities, and Corporations in the Department of Community and Economic Development
This announcement stems from investigations of the two firms by the California Department of Corporations, the U.S. Securities and Exchange Commission, NASD, Inc., and the New York Stock Exchange. The settlements are related to the April 2003 Global Settlement that ten other investment banks reached with the state, federal and industry regulators.
Deutsche Bank will pay a total of $87.5 million: $25 million in disgorgement, $25 million as a penalty for various conflicts of interest, $25 million to fund independent research, $5 million to fund and promote investor education, and $7.5 million for failing to promptly produce e-mail and thereby delaying by over a year the investigation as to Deutsche Bank. Thomas Weisel Partners will pay a total of $12.5 million: $5 million in disgorgement, $5 million as a penalty for various conflicts of interest, and $2.5 million to fund independent research.
The investigations of Deutsche
Bank and Thomas Weisel Partners, together with the 2003 Global
Settlement, are part of a comprehensive regulatory effort to
reform the relationship between investment banking and research
and to manage appropriately conflicts of interest.
Under the terms of the settlement, Deutsche Bank is also required to distribute $2.5 million to the Investor Protection Trust (IPT), which will use the money to fund investor education initiatives on the state and national levels. The IPT is an established charitable organization with experience handling settlement funds and a history of investor education successes.
California, the District of
Columbia, and Maryland negotiated the settlements. They were
unanimously recommended by the Board of Directors of the North
American Securities Administrators Association.
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