Deutsche Bank Securities Inc. and Thomas Weisel Partners have agreed to pay a combined $100 million to settle SEC charges of conflicts of interest between research and investment banking.
The two firms had refused to be part of the $1.4 billion settlement over stock-research analyst misconduct, reached more than a year ago with ten other investment banks.
The SEC says Deutsche Bank Securities agreed to pay $87.5 million, including $7.5 million for failing to produce e-mails in a timely manner, and Thomas Weisel Partners will pay $12.5 million.
As part of the settlement, says the SEC, the firms are required to separate the research and investment banking departments, restructure how research is reviewed and supervised, ban analysts from receiving compensation for investment banking, and make independent research available to investors.
The agreement also restricts the firms from allocating securities of hot initial public offerings to certain company officers and directors, a practice known as “spinning,” to attract investment banking business.
Deutsche Bank Securities and Thomas Weisel said they were “pleased” to resolve the matter.
Before the settlement was finalized in April 2003, Thomas Weisel said it had agreed to pay $12.5 million to settle matters, but talks between the firm and regulators broke down.
The probe of Wall Street firms was prompted in part by abuses revealed by New York Attorney General Eliot Spitzer and resulted in the $1.4 billion settlement.
Of the $87.5 million Deutsche Bank Securities will pay, $25 million is disgorgement, $25 million represents a penalty, $25 million will be used fund independent research and $5 million will be used to fund and promote investor education.
Thomas Weisel’s payment includes $5 million in disgorgement, $5 million penalty and $2.5 million to fund independent research.
Under the global settlement, half of the disgorgement and penalty amounts will be put into funds to benefit the firms’ customers, and the remainder will be paid to state regulators.
Without admitting or denying the allegations, the firms reached the settlement with the SEC, the North American Securities Administrators Association, NASD, the New York Stock Exchange, and state regulators, including California’s Department of Corporations.