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Piper Jaffray Agrees To Pay $32.5M In Fines

Dec 31, 2002 | USA Today Piper Jaffray, the investment banking unit of U.S. Bancorp, agreed Monday to pay $32.5 million in fines to settle allegations that it misled customers with biased stock research.

The deal, which also includes sweeping industry reform measures, is designed to end a damaging year of federal and state conflict-of-interest investigations.

Piper's move comes days after securities regulators announced 10 of the nation's largest securities firms, including Citigroup, Credit Suisse First Boston and Merrill Lynch, settled similar conflict-of-interest allegations by agreeing to pay a total of $1.4 billion in fines and other costs.

Piper and San Francisco-based investment banking boutique Thomas Weisel Partners were also party to the global settlement talks but failed to finalize terms along with the bigger firms. Piper and Weisel balked at paying $50 million to $75 million each in fines. Weisel is the last remaining holdout. Weisel officials could not be reached for comment Monday.

Piper, a unit of the nation's eighth-biggest bank, said it will pay a $25 million fine and contribute $7.5 million to support independent research for small investors over the next five years.

The settlement amount is less than the $44 million Minneapolis-based U.S. Bancorp, which bought Piper for $730 million four years ago, spent on postage in the third quarter.

Piper's fine is also less than a tenth the size of the $400 million top fine levied against Citigroup, the world's biggest bank. But while securities regulators say they found plenty of evidence suggesting that Piper hyped stocks to gain investment banking business, the firm's relatively small size was taken into account.

Piper has 1,200 brokers in 26 states and ranked 23rd this year among the nation's stock underwriters.

''Since this process began, our regulators and we have shared the goals of reinforcing equity research independence, bringing about progressive changes to various industry practices and restoring confidence in the capital markets system,'' Piper CEO Andrew Duff said in a statement. ''We believe this settlement will accomplish these goals.''

Securities regulators say they hope the agreements will force firms to change decades-long practices on Wall Street that contributed to the Internet stock bubble in the 1990s. Reforms are aimed at separating investment banking from stock research analysts. They would also ban brokerages from setting aside shares in stock offerings for corporate executives with whom they do business.

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