Five securities firms have tentatively agreed to pay fines totaling $8.3 million for allegedly failing to keep e-mails and produce them in regulatory investigations, people familiar with the matter told The Wall Street Journal.
The five firms — Goldman Sachs Group Inc. (GS), Morgan Stanley (MWD), the Salomon Smith Barney unit of Citigroup Inc. (C), the U.S. Bancorp Piper Jaffray unit of U.S. Bancorp (USB), and the securities unit of Deutsche Bank AG (DB) each plan to pay about $1.65 million to settle the expected civil charges without admitting or denying wrongdoing. Although the amount is relatively small, the penalties are sizable compared with other fines for such books-and ecords violations, regulators said.
A regulatory group led by the Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange had warned the firms of the possible fines at a meeting at the SEC in late July. The formal filing of the case alleging books-and ecords violations could come as early as next week, the people said. Representatives of Deutsche, Goldman, Morgan, Salomon and Piper Jaffray declined to comment.
The case is significant for Wall Street because e-mails have been at the center of many of the high-profile probes of alleged wrongdoing during the stock-market bubble. In one case, ex-Merrill Lynch & Co. analyst Henry Blodget derided as “this piece of junk” a stock Merrill was recommending. In another, ex-Salomon analyst Jack Grubman threatened to “put the proper rating” on the stock of a company whose executives were complaining about the tone of one of his reports. And in yet another case, regulators alleged that the Credit Suisse First Boston unit of Credit Suisse Group improperly obtained outsized commissions in exchange for hot allocations of initial public offerings by citing e-mails from brokers, including one saying “we expect a 65% return” on a customer’s IPO profits.
The planned sanctions are separate from a pending global settlement being negotiated of alleged conflicts of interest in Wall Street research and in allocations of IPOs. Nonetheless, there is a possibility the charges could be rolled into the global settlement, one person on Wall Street said.