Brokerages Fined Over Research Fees
Seven regional brokerage firms have been fined a total of $3.65 million by federal regulators for allegedly failing to disclose that they received payments for issuing research on certain companies, officials said Wednesday.
Investment firms are required by law to disclose such payments, the Securities and Exchange Commission said in announcing the civil fines against Adams Harkness Inc.; SG Cowen & Co.; Friedman, Billings, Ramsey & Co.; Janney Montgomery Scott; Morgan Keegan & Co.; Needham & Co.; and Prudential Equity Group.
From 1999 through 2002, the seven brokerages received payments from other investment firms in exchange for issuing research on companies for which the investment firms were underwriting sales of securities, in some cases going public, according to the SEC.
“If a firm receives a payment, any portion of which is for research, that firm must disclose the receipt and amount of the payment when it publishes the research,” said Antonia Chion, an associate director of the SEC’s enforcement division. “Failure to do so violates the securities laws and deprives investors of information relating to the objectivity of the research.”
The fines range from $125,000 to $875,000. The amounts are relatively small, but the settlement touches on an important area that can affect investors’ confidence.
In April 2003, 10 of Wall Street’s biggest investment firms agreed to pay a total of $1.4 billion to settle allegations by the SEC and state securities regulators that they issued biased stock ratings to lure investment-banking business.
