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Regulators to Discuss Fines With Banks

Dec 9, 2002 | Wall Street regulators and investment banks may agree an historic "global settlement" this week at meetings scheduled to discuss the fines imposed on the banks after the investigation into conflicts of interest.

The Securities and Exchange Commission and Eliot Spitzer, the New York state attorney-general, told banks of their potential fines last month. At this week's meetings the regulators hope to learn whether banks are likely to contest their fines and the findings against them.

Regulators have been investigating whether investment banks issued over-optimistic research and steered shares in "hot" initial public offerings to important corporate executives in order to win lucrative banking contracts.

A person familiar with this week's talks said there were still hurdles to be overcome, including the size of the fines and the uses to which they will be put. Regulators have not decided whether to use the money for compensating investors, which would be politically popular, or for other causes.

The settlement has two parts - penalties for past behaviour and reforms to prevent future abuses. Banks could lessen their penalties, possibly by agreeing to more sweeping reforms.

Citigroup's Salomon Smith Barney investment banking arm will probably pay the biggest fine - as much as $500m, according to people familiar with the negotiations. Credit Suisse First Boston came next, at $250m.

Most others, including Goldman Sachs, Lehman Brothers, Bear Stearns, Deutsche Bank, Morgan Stanley, JP Morgan Chase, Piper Jaffray and Thomas Weisel Partners, were expected to fall in the $50m-$75m range.

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