Judge Rejects SEC, Wall Street Attempt To Ease Analyst Curbs
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The Securities and Exchange Commission is working with numerous Wall Street firms to rid the financial system of the landmark 2003 deal which placed tight restriction on stock analysts, in a move that could further the debate over a financial-regulatory system overhaul, according to reports from the Wall Street Journal.
In a U.S. District Court ruling on Monday, Judge William H. Pauley III in New York rejected the proposed end to the deal which was put in place to end abuse by Wally Street firms.
If the proposal would have been allowed, it would have granted the employees of Wall Street firm's investment-banking and research departments to communicate without lawyers or compliance department officials present. The activity is strictly prohibited by the settlement.
The settlement in 2003 came following the burst of the technology-stock bubble, after it was found out that analysts at investment analysts at big Wall Street banks were pumping up stocks on behalf of their own firms and profiting from the rising value of the initial public offerings.
"The parties' proposed modification would deconstruct the firewall between research analysts and investment bankers erected by the parties when they settled theses actions," Judge Pauley said in his ruling.
It came as a surprise to some outsiders that the SEC would side with Wall Street banks in an effort to repeal the major provision.
The securities firms covered in the settlement include Goldman Sachs Group Inc. (NYSE: GS), Morgan Stanley (NYSE: MS) and Bank of America Corp. (NYSE: BAC) unit Merrill Lynch & Co.
The settlement in 2003 made it mandatory to have a complete separation of research and banking staffs, budgets and chains of command. Analysts were prohibited from even speaking with investment bankers unless policing officials were present, or a rare case of permission was granted by a judge’s approval.
In a U.S. District Court ruling on Monday, Judge William H. Pauley III in New York rejected the proposed end to the deal which was put in place to end abuse by Wally Street firms.
If the proposal would have been allowed, it would have granted the employees of Wall Street firm's investment-banking and research departments to communicate without lawyers or compliance department officials present. The activity is strictly prohibited by the settlement.
The settlement in 2003 came following the burst of the technology-stock bubble, after it was found out that analysts at investment analysts at big Wall Street banks were pumping up stocks on behalf of their own firms and profiting from the rising value of the initial public offerings.
"The parties' proposed modification would deconstruct the firewall between research analysts and investment bankers erected by the parties when they settled theses actions," Judge Pauley said in his ruling.
It came as a surprise to some outsiders that the SEC would side with Wall Street banks in an effort to repeal the major provision.
The securities firms covered in the settlement include Goldman Sachs Group Inc. (NYSE: GS), Morgan Stanley (NYSE: MS) and Bank of America Corp. (NYSE: BAC) unit Merrill Lynch & Co.
The settlement in 2003 made it mandatory to have a complete separation of research and banking staffs, budgets and chains of command. Analysts were prohibited from even speaking with investment bankers unless policing officials were present, or a rare case of permission was granted by a judge’s approval.
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