NEWARK
– Wachovia Capital Markets LLC (“Wachovia”)
has paid the New Jersey Bureau of Securities
civil monetary penalties of $561,458 under
the terms of a settlement with the Bureau
and other state securities regulators, Acting
Attorney General Anne Milgram, Acting Consumer
Affairs Director Stephen B. Nolan and Bureau
of Securities Chief Franklin L. Widmann
announced today.
The settlement resolves allegations of potential
conflicts of interest between Wachovia’s
research analysts and investment bankers.
It includes $518,668 in penalties for failure
to supervise its employees, and $42,790
in penalties for failure to preserve required
records.
“Consumers
must have factually accurate and unbiased
information when deciding how to invest
their hard-earned dollars,” said Acting
Attorney General Milgram. “Truth is
a precious commodity. The ratings assigned
to stocks must be accurate so investors
can make informed decisions.”
Wachovia
also paid money into a fund administered
by the Investor Protection Trust, a non-profit
corporation set up to make grants of investor
education money paid by the largest Wall
Street firms in connection with the analyst
research settlements in 2002-3. The Wachovia
matter concludes the last of 13 such settlements.
“I am pleased that our Bureau of Securities
played such an important role in the successful
resolution of this case,” said Acting
Director Nolan. “The payment of funds
for investor education will help ensure
investors have the knowledge and skills
they need to make the right decisions.”
The
settlement resolves a multistate investigation
of Wachovia Capital Markets, based in Charlotte,
North Carolina, which operates Wachovia
Corporation’s institutional brokerage
and capital markets businesses. The investigation
included state securities regulators from
Nebraska, Virginia and North Carolina with
considerable assistance and contributions
from the New Jersey Bureau of Securities
and the states of Alabama, Connecticut,
Georgia, Maine and Utah.
The settlement resolves the following
charges:
- State
investigators determined that Wachovia
failed to supervise its research analysts;
and
- Wachovia
failed to maintain and produce in a timely
manner certain books and records as required
by law. Wachovia also failed to maintain
a system that allowed it to locate and
retrieve back-up tapes for its email system.
According to the overall terms of the settlement,
Wachovia Capital Markets will pay $20 million
to the state jurisdictions (50 states, plus
the District of Columbia and Puerto Rico)
for failing to supervise its employees in
connection with potential conflicts of interest;
$1.65 million for failing to preserve certain
books and records; and $3 million to be
used for investor education paid to the
Investor Education Fund in Washington, D.C.
“The
Wachovia case illustrates once again how
leveraging the resources of state securities
regulators around the country benefits investors
nationwide and each of the states.”
Widmann said. “New Jersey benefits
directly from the work of our colleagues
in these other states by having another
major firm pay for its misdeeds and change
its behavior.”
New Jersey had a key leadership role in
the research analyst cases, including Wachovia.
Bureau of Securities Chief Widmann was the
Co-chair of the NASAA Analyst Research Task
Force Steering Committee that organized
and coordinated the efforts of 45 states
in the investigations of 13 of research
analyst conflicts of interest cases, including
the Wachovia matter. Widmann also directly
assisted the lead states on the Wachovia
case.
In addition to the Wachovia matter, the
analyst investigations resulted in settlements
with Bear Stearns, Citigroup, Credit Suisse
First Boston, Deutsche Bank, Goldman Sachs,
J.P. Morgan Chase, Lehman Brothers, Merrill
Lynch, Morgan Stanley, Thomas Weisel Partners,
UBS Financial Services/UBS Warburg and U.S.
Bancorp Piper Jaffray.
The Bureau of Securities received nearly
$13 million in civil monetary penalties
in connection with the research analyst
cases. Overall, the research analyst cases
resulted in the $1.4 billion dollar “global”
settlement between the firms and the state
regulators, the U.S. Securities and Exchange
Commission, NASD and New York Stock Exchange.
The SEC, NASD and NYSE did not participate
in the Wachovia matter. The 52 state jurisdictions
received more than $487 million in civil
penalties as a result of the global settlement.
The matter was handled at the New Jersey
Bureau of Securities by Bureau Chief Franklin
Widmann. Deputy Attorney Victoria Manning
of the Division of Law assisted the Bureau.
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