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Piper Jaffray Fined $300K

NASD Says Executive Threatened To Discontinue Research On Company If It Did Not Bank With Firm

Jun 25, 2002 | CNN/Money

The National Association of Securities Dealers said Tuesday it fined and censured U.S. Bancorp Piper Jaffray and one of the firm's managing directors $300,000 for threatening to discontinue research on a company that did not use Piper Jaffray for investment banking business.

The NASD said it found that a Piper senior investment banker and managing director, Scott Beardsley, told biotech firm Antigenics Inc. (AGEN: down $0.05 to $9.65, Research, Estimates) that it would discontinue research on the company and would not make a market for its stock if the company did not use Piper as the lead underwriter on a planned secondary stock offering.

"Brokerage firms and their executives cannot use threats regarding research activities as a way to obtain investment banking business," said Mary Schapiro, NASD's President of Regulatory Policy and Oversight. "The threat to drop research coverage if Piper were not selected as the lead underwriter for a secondary offering was totally inappropriate and undermines the integrity of the market."

The NASD fined Piper, a unit of U.S. Bancorp (USB: down $0.08 to $22.80, Research, Estimates), $250,000 and Beardsley $50,000. As part of the settlement, Piper neither admitted to or denied any wrongdoing.

"We believe that an expeditious settlement of this matter was in the best interests of our clients and our business," Thomas Schnettler, president and head of equity markets for Piper Jaffray, said. "We strongly support efforts made by the NASD and member firms to encourage public confidence in the capital markets system."

Equities research on Wall Street has come under fire recently as analysts' recommendations are seen as a way for investment banking firms to obtain and keep investment banking deals.

In May, Merrill Lynch & Co. settled charges with New York State Attorney General Eliot Spitzer that its Internet analysts had given stocks top ratings in order to attract lucrative investment banking clients.

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