5 Brokerages Fined For Not Preserving E-Mails

Five Wall Street brokerage firms Tuesday were fined a total of $8.25 million for not preserving e-mails, a discovery made as securities regulators probed whether analysts were pushed to help win investment banking business.

The five firms -- Goldman, Sachs & Co., Citigroup Inc.’s Salomon Smith Barney unit, Morgan Stanley & Co., Deutsche Bank Securities Inc. and U.S. Bancorp Piper Jaffray Inc. -- agreed to pay $1.65 million each and to review and report on procedures for keeping e-mails.

“Each firm had inadequate procedures and systems to retain and make accessible e-mail communications,” the Securities and Exchange Commission, New York Stock Exchange and NASD, formerly known as the National Assn. of Securities Dealers, said. Rules require the firms to keep such records for at least two years.

The discovery that the firms were not properly keeping communications was made as regulators probed Wall Street firms on issues such as whether analysts were pressured to issue overly bullish research to help win investment banking business.

Settlement talks in the broader investigation of analysts could result in firms paying a total of more than $1 billion. Some individual brokerages could cough up as much as $500 million, sources familiar with the situation have said.

A settlement could come by mid-December, they have said.

Electronic communications in some cases have been the death knell for some highflying Wall Street analysts, such as Merrill Lynch & Co.’s Henry Blodget and Salomon’s Jack Grubman, whose e-mails trashing stocks they publicly lauded have come to light.

The securities regulators Tuesday complained the firms did a haphazard job of keeping e-mails, organizing them poorly and sometimes erasing computer hard drives preserving communications.

In addition to the fines, the firms agreed to report to the regulators within 90 days on their procedures to comply with the rules for preserving e-mails. Regulators said although the firms did not admit or deny the allegations, they consented to findings that they had violated SEC and stock market rules.

Andrew Duff, Piper Jaffray’s chief executive, said in a statement: “We are confident that our current e-mail procedures and enhanced software fully meets all of the regulatory requirements for e-mail retention.”

“This settlement resolves a complex regulatory issue that has been the subject of much discussion over recent years,” Salomon spokeswoman Arda Nazerian said. “We’re pleased to have the matter resolved.”

Goldman and Deutsche Bank officials were not available to comment. Morgan Stanley declined to comment.