Washington state’s investigation into U.S. Bancorp Piper Jaffray’s stock research practices could be complete by the end of the year, investigators said Wednesday.
However, a universal settlement between securities firms and state attorneys general could be in place before the Piper probe is done.
Washington Securities Director Deborah Bortner said 10 people have been culling large numbers of Piper records and e-mails for months and are waiting for Piper to produce more documents.
“Documents are not getting to us as quickly as we would like. But we are not litigating,” Bortner said.
“Still, we want certain documents but have not received them. My view is that the sooner we see them the sooner we can make our evaluation as to if we have a case or not.”
Bortner said the investigation, like those in New York that uncovered some damaging e-mails at Merrill Lynch and other firms, is focusing on Piper’s e-mails and compensation. “Some of the e-mails look problematic,” she said, adding that more work is needed to determine the context of some of the messages.
Piper spokeswoman Erin Freeman would only say, “We are cooperating fully and working closely with the state of Washington in this inquiry. We have devoted extensive internal and external resources to satisfy all of the states requests.”
Washington began investigating Piper in May as part of a broader probe of brokerage practices in which different states were assigned to examine individual firms.
The Piper probe, like the others, is focusing on whether equity research analysts in the late stages of the last bull market were panning certain stocks internally while publicly touting them in an effort to win the companies’ investment banking business.
Piper already has been slapped by the Securities and Exchange Commission, which fined the firm $250,000 in June over allegations that it threatened to terminate analyst coverage of a biotechnology firm unless Piper was made the principal underwriter of a secondary stock offering. Piper didn’t admit wrongdoing.
Merrill Lynch & Co. has earned the most notoriety so far, settling with the New York attorney general’s office by promising to pay a $100 million fine and separate its research department from its investment banking business. Last month, Citigroup didn’t admit wrongdoing but paid $5 million to settle charges by the National Association of Securities Dealers that one of its research analysts misled investors on a telecommunications stock.
The New York attorney general’s office and the SEC are now working on a proposal to create a separate, industry-funded equity research boutique. The boutique would present stock opinions from a multitude of research firms in an effort to thwart conflicts of interest.
Bortner said a group settlement between regulators and various investment banking firms would not surprise her. Washington officials would not say whether they would continue the Piper investigation to a conclusion if an industrywide settlement is reached first.
“There are lots of people working on these [cases], from the North American Securities Association and Nasdaq and the New York Stock Exchange to the Securities and Exchange Commission,” Bortner said. “We are ready to support some of the discussions that have gone on so far about really having different lines of reporting [between research and investment banking].
“I am assuming that once the models get set up, that it will apply to everyone.”
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