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Wall Street Fines Could Top $1 Billion In Regulators' Probe

Nov 22, 2002 | AP

Regulators began meeting with Wall Street investment firms Friday to discuss fines, reportedly totaling more than $1 billion, for misleading investors with poor research.

Firms will be given ranges of impending fines during meetings Friday and next Monday and Tuesday with New York state Attorney General Eliot Spitzer's office, the Securities and Exchange Commission and other regulatory groups, a source close to the talks told The Associated Press Friday.

The final fine levels will depend in some cases on the willingness of companies to implement changes to prevent future investment advice abuses and conflicts between firms' stock analyses and their investment-banking business, the source said.

The Wall Street Journal first reported Friday the fines could total more than $1 billion. Citigroup faces an assessment of more than $500 million and Credit Suisse First Boston will be fined about $200 million, the Journal reported.

Several other major securities firms, including Goldman Sachs Group, Morgan Stanley, Lehman Brothers Holdings Inc., Deutsche Bank AG, UBS AG and Bear Stearns, are facing fines of about $75 million each, according to the newspaper.

"They'll be told a dollar range which will correspond to the range they'll have to pay," the source told the AP. "It's not the final word on what the fines will be, but it is a sense of what the exposure will be."

In May, Merrill Lynch & Co. agreed to a settlement with Spitzer's office that included a $100 million fine and the separation of its analysts from its investment and banking operation.

Smaller firms including U.S. Bancorp Piper Jaffray will face smaller fines because unlike Citigroup, they cannot bear a fine of hundreds of millions of dollars, the source told the AP.

A spokeswoman from Piper Jaffray told the Wall Street Journal that "based on everything we know, the findings from the regulators would not be characterized as egregious."

In addition to regulators from Spitzer's office and the SEC, officials from the New York Stock Exchange and the National Association of Securities Dealers are also involved in discussions about fines this week and next with investment firms.

The discussions could be a final step in ending the Wall Street conflicts that Spitzer has said cost countless small investors millions of dollars. Investors were advised to buy stocks that analysts privately derided in order to bolster the stocks' value and lure the companies as investment banking clients.

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