Massachusetts regulators expanded their role yesterday in a nationwide investigation into the conduct of Wall Street investment firms, agreeing to take a lead role in the probe of US Bancorp Piper Jaffray.
Secretary of State William F. Galvin, who directs the Massachusetts Securities Division, said regulators from Washington state called him late Tuesday and asked for help with their investigation into Piper Jaffray’s activities. He said he readily agreed, and as of yesterday afternoon Washington state regulators had already faxed some documents to Boston and were planning to send others via overnight mail.
Until now, Galvin’s office has focused on Credit Suisse First Boston, while its counterparts in other states concentrated on different firms. The Securities and Exchange Commission, the National Association of Securities Dealers, and numerous state securities regulators combined their efforts this year in an investigation into whether the country’s biggest investment firms misled investors with positive research reports intended to curry favor with potential investment banking clients and used lucrative IPO shares to curry favor with corporate executives.
Among the 12 Wall Street firms being probed, Galvin said, Piper Jaffray has been among the least cooperative in providing information to investigators.
The Minneapolis-based company did not attend a negotiating session yesterday in New York City in which terms were discussed over a possible ”global settlement” involving all the cases, according to a source who attended the meeting. Three other firms, including CSFB, did attend yesterday, and the remaining eight companies are scheduled to meet with regulators today and tomorrow.
”The perception I’m getting from Washington [state] is that they have serious issues to deal with at Piper Jaffray, and they’d like a fresh set of eyes to look them over,” Galvin said. ”They want our experience in reviewing e-mails, analyzing the data they’ve received, and in putting a case together.”
If there is no settlement, Galvin said, regulators have to be prepared to take on Piper Jaffray in court.
A company spokeswoman denied that Piper Jaffray was attempting to stall the investigation or that settlement negotiations had broken off with regulators.
”We have cooperated fully and will continue to cooperate with regulators throughout this investigation,” spokeswoman Erin Freeman said.
In earlier negotiations over a possible settlement, regulators said they wanted Piper Jaffray to pay a $75 million penalty and agree to overhaul some of its corporate practices. The proposed penalty is lower than the $250 million regulators demanded of CSFB and Salomon Smith Barney only because, according to one regulator at the negotiations, ”Piper is smaller than the other two, as strictly a regional player.”
One negotiator said the settlement talks went well yesterday between regulators and CSFB, Salomon Smith Barney, and Bear Stearns. Piper Jaffray was willing to meet, too, the negotiator said, but Washington state officials asked to reschedule talks until a later date to give Massachusetts regulators time to get involved.
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