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Most of Utah's Securities-Analyst Settlement Goes to General Fund

Most of Utah's Securities-Analyst Settlement Goes to General Fund

Posted - May 6, 2003 at 9:48 a.m.



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SALT LAKE CITY (AP) -- Utah will get nearly $4 million as its share of last week's $1.4 billion securities-analyst settlement, but none of it will go the victims.

Initially, Utah's share of the settlement with Citigroup, Credit Suisse, Goldman Sachs and seven other securities firms will go to the state's Securities Investor Education Fund, said Tony Taggart, director of the Utah Securities Division.

However, at the end of fiscal year June 30, any money in that fund over $100,000 must be surrendered to the state's general fund.

"I wish we could keep it for investor education but it is just not going to happen," Taggart said.

The settlement stems from Wall Street's role in the stock market boom of the late 1990s. Securities analysts at securities firms touted hundreds of stocks to the investing public while privately disparaging many of those same companies.

Regulators, including investigators in Utah, started looking into those stock research practices after investors lost more than $8.5 billion in stock value following the market downturn in March 2000.

After signing on with the joint state and federal probe, Utah specifically was charged with investigating Goldman, Sachs & Co., which agreed to pay $110 million to settle claims against it.

Taggart said the inquiry focused on concerns that brokerages recommended stocks they knew were risky to get investment banking fees.

"In one instance, we found an analyst who knew his recommendations for AT&T and WorldCom were not justified but didn't do anything about it because of investment banking concerns," he said.

Although Utah and many other states will not provide restitution to those who relied on securities analyst research to guide their investment decisions, the U.S. Securities and Exchange Commission is setting up a $399 million fund to offer a little relief.

"We are recommending and are asking the federal court to approve the appointment of a fund administrator who will come up with a plan to address the question of how restitution can be provided to investors," SEC spokesman John Heine said.

Taggart said, "If an investor arbitrates or gets a court ruling against one of the brokerage firms involved, it (the brokerage) is going to have pay, regardless of whether the money comes from the SEC's settlement fund or from the firm itself."

(Copyright 2003 by The Associated Press. All Rights Reserved.)

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