Wall Street Payout Could Take 18 Months
Investors may have to wait 1 1/2 years for any payout from the $1.4-billion Wall Street settlement over biased stock research, the Securities and Exchange Commission said Monday.
The process for evaluating claims and dispensing money to investors could take more than 17 months, with additional time for review and approval by federal courts, the SEC said.
“This long wait is going to contribute to investor frustration and a sense among retail investors that the system does not work for them,” said Barbara Roper, investor protection director for the Consumer Federation of America. “But the fact that there is some effort being made to provide restitution is a good thing.”
The SEC described the plans for making the payments in a news release containing questions and answers about how the $1.4 billion from 10 Wall Street firms will be handled. The firms agreed to the settlement to resolve charges from the SEC and other regulators that stock analysts had slanted their advice to investors to help the firms win stock underwriting business.
The money earmarked for distribution to investors totals $399 million, with other parts of the settlement’s $1.4 billion going to investor education and to the states.
Before any payment is made, the SEC said a federal court must pick a fund administrator who then would have six months to develop plans for distributing the money. The plans would then go to the SEC staff for review, a process that would take an additional two months, the SEC said.
The plans, with any revisions, would go next to a federal judge. After court approval, the fund administrator would have nine months to submit reports to the SEC staff identifying who would receive money and how much.
One week later, the fund administrator would submit that plan to the federal judge and, after the court’s final approval, would begin to distribute the money, the SEC said. “There is nothing you need to do at this time,” the SEC told investors.
The agency said the Wall Street firms would supply all information necessary for the fund administrator to determine who may be eligible for a payment. The firms also will be responsible for notifying their present or former customers when the time comes to distribute the money.
There are 10 distribution funds, one for each of the nine settling firms other than Merrill Lynch & Co., and one for former Merrill Lynch analyst Henry Blodget, who has been ordered to pay $4 million in penalties.
Of the repayment funds, Citigroup Inc.’s share is $157.5 million. Credit Suisse First Boston’s share is $75 million. J.P. Morgan Chase & Co., Lehman Bros. Holdings Inc., Morgan Stanley, UBS Warburg, Goldman Sachs Group Inc. and Bear Stearns Cos. each will pay $25 million. U.S. Bancorp Piper Jaffray will pay $12.5 million. Blodget’s $4-million fine also will be included, the SEC said.
