Press Releases

For Immediate Release
April 28, 2003	Contact: Cheryl Weiss Communications Specialist (608) 264-7868

Ten of Nation's Top Investment Firms Settle Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking

(Madison) Under the terms of a settlement announced today between securities regulators, including the Wisconsin Department of Financial Institutions (DFI), and ten major Wall Street brokerage firms, the firms have agreed to make fundamental changes in the way they do business. The settlements result from allegations of conflicts of interest at brokerage houses where analysts recommended stocks due to improper influence from their investment banking colleagues.

Administrator Patricia D. Struck of DFI's Division of Securities said, "This historic agreement represents the closing of a regrettable chapter in the history of our financial markets. The reforms agreed upon in this settlement should provide for more objective investment research and stronger protections for investors."

North American Securities Administrators Association President Christine Bruenn, Securities and Exchange Commission Chairman William H. Donaldson, New York Attorney General Eliot Spitzer, NASD Chairman and CEO Robert Glauber, New York Stock Exchange Chairman and CEO Dick Grasso, and state securities regulators announced the completion of the enforcement actions at a press conference at the SEC today, implementing the global settlement in principle reached and announced by regulators last December.

That settlement followed joint investigations by the regulators of allegations of undue influence of investment banking interests on securities research at brokerage firms, and the enforcement actions announced today track the provisions of the December global settlement in principle.

The ten firms against which enforcement actions are being announced today are:

· Bear, Stearns & Co. Inc. ("Bear Stearns")
· Credit Suisse First Boston, LLC ("CSFB")
· Goldman Sachs & Co. ("Goldman")
· Lehman Brothers, Inc. ("Lehman")
· J.P. Morgan Securities, Inc. ("J.P. Morgan")
· Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("Merrill Lynch")
· Morgan Stanley & Co. Incorporated ("Morgan Stanley")
· Citigroup Global Markets Inc. f/k/a Salomon Smith Barney, Inc. ("SSB")
· UBS Warburg LLC ("UBS")
· U.S. Bancorp Piper Jaffray Inc. ("Piper Jaffray")

Wisconsin participated in a four-state team investigation, conducted together with federal regulators over a number of months, into Piper Jaffray's investment research activities. The Piper Jaffray investigation resulted in an order containing allegations of unethical business practices, including conflicts of interest that compromised the objectivity of the firm's research reports, issuing research reports for which there was no reasonable basis, and failures to supervise by the firm.

Pursuant to the enforcement actions, the ten firms will pay penalties totaling $437.5 million and make disgorgement of $437.5 million (which includes Merrill Lynch's previous payment of $100 million in connection with its prior settlement with the states relating to research analyst conflicts of interest). The firms also will make payments totaling $432.5 million to fund independent research and payments of $80 million from seven of the firms will fund and promote investor education.

Wisconsin expects to receive approximately $7 million as a result of the settlements with all the firms investigated by the task force. Initially, the funds will be deposited in the State Treasury with plans for final use being worked out over the next few months. "Whether the funds are used to support existing security regulatory efforts or other key activities, they illustrate the impact that can be achieved through focused state and federal regulatory efforts," Ms. Struck noted.

Under the terms of the settlement, the firms will not seek reimbursement or indemnification for any penalties that they pay. In addition, the firms will not seek a tax deduction or tax credit with regard to any federal, state or local tax for any penalty amounts that the firms pay under the settlement.

Today's enforcement actions also will reform industry practices regarding the relationship between investment banking and research and will bolster the integrity of equity research. Among other significant reforms included in these actions are the following:

· To ensure that stock recommendations are not tainted by efforts to obtain investment banking fees, research analysts will be insulated from investment banking pressure. The firms will be required to sever the links between research and investment banking, including prohibiting analysts from receiving compensation for investment banking activities, and restricting analysts' involvement in investment banking "pitches" and "road shows."

· To ensure that individual investors get access to objective investment advice, the firms will be obligated to furnish independent research. For a five-year period, each of the firms will be required to contract with no fewer than three independent research firms that will make available independent research to the firm's customers. An independent consultant for each firm will have final authority to procure independent research.

· To enable investors to evaluate and compare the performance of analysts, research analysts' historical ratings will be disclosed. Each firm will make its analysts' historical ratings and price target forecasts publicly available.

Struck stated that, "It's our hope that this settlement will change the way business is done on Wall Street and will further increase investor confidence in the integrity of our markets."

Payments in Global Settlement Relating to
Firm Research and Investment Banking Conflicts of Interest

* Fines and disgorgement funds.
**Payment made in prior settlement of research analyst conflicts of interest with the states securities regulators.