SEC Names Firms for Restitution Fund
The Securities and Exchange Commission identified 32 companies that it believes were the “most suitable” examples of situations in which investors could apply for restitution from a fund set up by Wall Street firms to settle an investigation of biased analyst research.
Companies whose investors were the alleged victims of biased stock research included telecommunications firms, such as Global Crossing Ltd., WorldCom Inc., AT&T; Corp., Winstar Communications Inc., Broadwing Inc. and Triton Network Systems, according to the SEC.
Other companies included Level 3 Communications Inc., XO Communications Inc., Micromuse Inc., Agilent Technologies Inc., RealNetworks Inc., Razorfish Inc. and Exodus Communications Inc.
The SEC, which negotiated with state regulators to achieve the $1.4-billion settlement, provided the company list in a court filing the agency submitted Friday in New York to answer questions posed by U.S. District Judge William Pauley, who must approve the settlement.
“The judge is being asked to make a determination that the settlement amounts are fair and reasonable, and he is obviously looking for the backup that will enable him to do his job,” said Stephen Crimmins, a former SEC trial attorney who is now a partner at Pepper Hamilton in Washington.
The commission stressed that although the alleged wrongdoing, which involved a plan to win investment banking business, spanned two or three years, it would be incorrect to assume that the damages awarded to investors would involve the total volume of shares traded in that period.
The ultimate determination of which investors are eligible to recover from the damage fund will be made by an administrator to be named if the settlement is approved, the SEC said.
The investment banks participating in the settlement do not intend to deduct their payments from their income taxes or use insurance to pay those amounts, the SEC filing said.
The SEC said recovery would be limited to investors who had been hurt by biased research involving stock of a company mentioned in court papers related to the settlement with the investment banks. Investors allegedly damaged by bank actions related to initial public offerings would not be eligible to apply to the fund, the SEC said.
Of the $1.4-billion settlement, $975 million represents penalties and payments for investors, $432.5 million is for independent research, and $80 million will go to investor education.
