Tuesday, April 29, 2003

Bubble-Gum Ma-sheen Gone n' Hit the Jackpot-The big brokerages setted for $1.4 billion in fines for their long-standing buy-side bias on stock analysis; New York AG Elliot Spitzer just got his big case in his portfolio to move up to governor or mayor.
The brokerage firms will have to sever the troublesome links between financial analysts' research and investment banking, pay a total $432.5 million over five years for independent stock research for their customers and fund an $80 million investor education program. A fund of $387.5 million will be set up to compensate customers of the ten firms; $487.5 million in fines will go to states according to their population.
A few questions come to mind. 1) Why do the states get more than the people actually harmed? Spitzer can brag about bringing about $30 million or so for New York. 2) Who gets to supervise the "investor education programs?" Will they be allies of Spitzer? Campaign contributers, perhaps? Will the programs be politically neutral, or have a political agenda? 3) Who gets to run the "independent" stock research department? It would likely be people untainted by positions in the bad old brokerage firms, leaning things towards more liberal watchdog groups. This could easily be fully on the up-and-up, but keep an eye on who gets the money and the power in this settlement.

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