How Wall Street firms put the interests of their individual clients dead last - diverse articles
The heaviest penalties in the settlement went to Salomon Smith Barney, Credit Suisse First Boston and Merrill Lynch. Regulators contended that analysts at these firms committed securities fraud by recommending stocks to the public they had expressed misgivings about privately.
While the symbiotic relationship between Wall Street research analysts and investment bankers harmed investors, it was beneficial to the firms. Lehman Brothers and Goldman, Sachs, according to regulators, encouraged analysts to work closely with investment bankers to generate deals. Goldman, Sachs aligned its research, equities and investment banking divisions to work collaboratively and fully leverage its limited research resources. In 2000, Goldman noted happily that "research analysts, on 429 different occasions, solicited 328 transactions in the first 5 months" and that "research was involved in 82 percent of all won business solicitations."
story.news.yahoo.com
List of the ten penalized firms
The SEC News Digest lists the ten firms against which enforcement actions are being announced:
sec.gov
SEC, NASD, NYSE, New York Attorney General’s Office Permanently Bar Jack Grubman and Require $15 Million Payment
Background: Grubman got “famous” because in order for upgrading At&T he asked his employer to arrange for his children to be admitted on a “high-end” nursery school. His employer then donated $1m to the nursery school, Grubman’s kids could make friends with prominent East river offsprings, At&T was upgraded and the firm’s investment banking team had a new client….
nyse.com
Analysts are no longer going to be stars
Many in the investment banking industry believe that this week's Wall Street settlement brings to an end the most difficult part of the overhaul of equities research. This could not be further from the truth. The research business is fundamentally sick, for reasons that go well beyond the legal and reputation issues.
Simply put, the research arms of the big investment banks are far too expensive, given the structural decline in margins in the equities business. They urgently need to deliver more relevant, more original and better targeted research. While some analysts have provided company analysis that is useful enough to justify the cost, these individuals remain the exception.
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