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Report: Investment Bank Broke Settlement

May 12, 2003 | AP

A Bear Stearns analyst reportedly appeared in a promotional Webcast touting the initial public offering of a credit card processor just days after the investment bank agreed to avoid such practices as part of a sweeping Wall Street settlement.

The bank delayed the IPO of iPayment Inc., apologized to regulators and said it would bar the analyst from covering the stock after questions were raised by The Wall Street Journal, the newspaper reported Monday. A call to Bear Stearns on Monday was not immediately returned.

The episode fueled rising concerns about a lack of contrition on Wall Street following the government's recent $1.4 billion pact with 10 large investment firms.

The settlement officially takes effect 60 days after the pact was entered into court files, meaning Bear Stearns technically did not violate the agreement.

"It's just astonishing to me that a firm could allow an analyst to participate in a road show and the fact that the prohibition on such conduct isn't literally in effect yet doesn't make me any less disappointed," Securities and Exchange Commission enforcement chief Stephen Cutler said in a statement obtained Monday.

Bear Stearns paid a total of $80 million to settle charges that it allowed investment banking interests to influence the research of stock analysts. Under the terms of the deal finalized on April 28, the firms collectively agreed not to use their stock analysts for marketing purposes or to curry favor with banking clients, including those whose companies they were taking public through IPO.

The Journal said a prerecorded "net roadshow" that Bear Stearns sent to institutional investors on May 2 included a video clip of Bear Stearns senior managing director James Kissane speaking about iPayment, which was going public during one of the worst IPO markets in years. Kissane said it was his "pleasure" to introduce the Nashville, Tenn.-based company, according to a replay of the conference reviewed by the Journal.

In a statement to the newspaper, Bear Stearns spokeswoman Elizabeth Ventura said: "We fully support both the letter and more importantly the spirit of the recent settlement agreement. We deeply regret that this unfortunate incident occurred. Once the problem was identified, we took immediate action to rectify the situation and are taking precautions to ensure that it will not occur again."

In his statement, Cutler said he considered it a positive sign that the firm was trying to make the situation right by acknowledging the problem and agreeing to assign coverage to another analyst.

"But this incident further underscores the need for the restrictions that we are putting into place as a result of the global settlement," he said.


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