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Piper Jaffray Fined For Not Properly Keeping E-Mails

Dec 3, 2002 | AP Securities regulators said Tuesday they fined five Wall Street firms a total of $8.25 million for not keeping e-mails related to office matters for the required period of time.

The five: Goldman Sachs, Salomon Smith Barney, Morgan Stanley, Deutsche Bank Securities and Minneapolis-based U.S. Bancorp Piper Jaffray - agreed to pay $1.65 million each and to review their record-keeping procedures, regulators said. None admitted or denied the allegations.

The fines will go to the U.S. Treasury, New York Stock Exchange and the National Association of Securities Dealers.

The investigation into how long firms hold onto such e-mail records comes after regulators and state prosecutors uncovered embarrassing e-mails showing analysts publicly hyping a stock they privately disparaged, allegedly to win lucrative investment banking business.

Merrill Lynch recently paid $100 million in fines to settle an investigation by New York state after its attorney general's office found incriminating e-mails by Merrill's former Internet analyst Henry Blodget. Citigroup and its Salomon Smith Barney investment banking group also came under fire last month for a situation involving its former telecommunications analyst Jack Grubman.

Regulators said the five firms fined Tuesday violated securities rules by failing "to preserve for three years, and/or to preserve in an accessible place for two years" such office memoranda as e-mails related to their exchange, brokerage or dealer businesses.

"We're happy now this finally resolves long-standing uncertainties about records requirements for e-mail retention practices," said Judy Hitchen, a spokeswoman for Morgan Stanley.

The firms now have 90 days to write to regulators and detail their plans to set up a new system to better retain e-mails in accordance with securities' rules, the regulators said.

Piper Jaffray said it did retain large volumes of e-mail, but its retention and procedures were deemed inadequate.

"We are confident that our current e-mail procedures and enhanced software fully meets all of the regulatory requirements," said Andrew Duff, president and chief executive officer of Piper Jaffray.

Ted Meyer, a spokesman for Deutsche Bank Securities, said the firm was "pleased to have resolved the matter" and was in the process of improving its system to ensure compliance.

Kathleen Baum, a Goldman spokeswoman, said the firm would comply with whatever regulators required.

Salomon spokeswoman Arda Nazerian said the firm was happy to have the complex issue resolved after the rules had been under discussion for several years.

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