The final piece of last year's $1.4 billion settlement between regulators and 10 top Wall Street brokerage firms over their equity research practices was put in place last month, but the ramifications for institutional money managers are just beginning to be felt.
"Clearly the settlement focuses on consumers and investor protection," said Alvi Abuaf, vice president of the financial services practice for the Americas at Capgemini Group, New York. "But there are many developments that will come out that will impact institutions."
In April 2003, the 10 firms settled charges leveled by New York Attorney General Eliot Spitzer and the Securities and Exchange Commission that retail investors were often getting less timely research than institutional investors. Regulators also alleged the research function, by virtue of equity analysts' close relationships with corporate executives, was largely a conduit for lucrative investment banking business.
The firms involved in the settlement are: Bear Stearns & Co. Inc.; Citigroup; Credit Suisse First Boston; Goldman Sachs & Co.; J.P. Morgan Chase; Lehman Brothers Holdings Inc.; Merrill Lynch & Co.; Morgan Stanley; Piper Jaffray & Co.; and UBS Warburg.