Deutsche Bank, Thomas Weisel Settle Stock Research Allegations

Deutsche Bank and Thomas Weisel Partners will pay a total of $100 million to settle allegations that they published misleading stock research to win investment banking business, California corporate regulators said Thursday.

The settlements have been in the works for more than a year. Ten other securities firms, including Merrill Lynch & Co. and Citigroup Inc., agreed in April 2003 to pay more than $1.4 billion in penalties and separate their research and investment banking businesses.

The delay of more than a year for the settlement with the Deutsche Bank Securities unit of Germany’s Deutsche Bank was caused by its failure to promptly turn over internal e-mails during the investigation, regulators said.

Thomas Weisel, a San Francisco partnership that does a fraction of the business of competitors such as Citigroup, balked at being grouped with the bigger firms and held out for a smaller fine.

Under the settlement negotiated by the California Department of Corporations, Thomas Weisel Partners will pay $12.5 million -- $5 million from disgorgement of profit, a $5-million penalty for conflicts of interest and $2.5 million to pay for independent research.

Deutsche Bank will pay a total of $87.5 million. The settlement includes $25 million from disgorgement of profits, $25 million in penalties for conflict-of-interest violations, $25 million to fund independent research and $5 million to promote investor education.

In addition, Deutsche Bank will pay $7.5 million for failing to produce evidence and delaying the investigation for more than a year.

From 1999 through much of 2001, “the firms engaged in inappropriate practices that resulted in undue influence by investment banking over research analysts, thereby creating conflicts of interest,” Corporations Commissioner William P. Wood said.

The two firms also agreed to separate the research and investment banking departments, prohibit analysts from getting compensated for investment banking activities and make independent research available to customers.

California’s Department of Corporations led the investigation, which also included regulators from the District of Columbia and Maryland.