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News and Press Releases |
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SETTLEMENT "OR" DISMISSAL:
Settlement Gives $80 Mln To Make Investors Smarter
By: Jonathan Stempel - Reuters
Fobes.com. April 28, 2003
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EXCERPT: "It's only when the tide goes out that you learn who's been swimming naked." This quote, attributed to billionaire investor Warren Buffett, bespeaks an antipathy toward blindly following the crowd when investing. The education component of the $1.4 billion investment banking research settlement announced on Monday is designed to address such potential pitfalls. "If investors aren't armed with basic facts so they can understand the transactions they are entering into, and what is in their best interests, they are at a big disadvantage," said Christine Bruenn, Maine's securities administrator and president of the North American Securities Administrators Association, an umbrella group for state regulators. The settlement between U.S. market regulators and 10 Wall Street firms sets aside $80 million for investor education, $5 million less than expected, over a five-year period. Half of the money will be designated by the U.S. Securities and Exchange Commission, and the rest by the states. It's not a huge sum. Banks, brokerages and mutual fund companies spent an average $78 million a month last year on consumer investment advertising, according to Competitrack Inc., an advertising research firm. Analysts said that while the funds from the settlement are welcome, it's not clear how far they will go toward helping shield investors from Wall Street excess, and from their own. "Investors will always be prone to the madness of crowds, whether it's on the upside or the downside," said Michael Boone, a certified financial planner and president of MWBoone & Associates in Bellevue, Washington. The global settlement stemmed from allegations that analysts issued overly bullish stock research reports on companies, mainly in the technology and telecommunications sectors, to drum up investment banking business. Analysts such as Jack Grubman, formerly of Citigroup Inc.'s (nyse: C - news - people) Salomon Smith Barney, and Henry Blodget, formerly of Merrill Lynch & Co. (nyse: C - news - people), publicly touted companies they trashed privately, according to e-mails. Both were banned from the securities industry for life.
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