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Five investment banks were collectively fined $8.25 million for failing to give regulators e-mails during an investigation into whether the firms issued misleading or false research reports to court investment banking clients. Deutsche Bank Securities Inc.; Goldman, Sachs & Co.; Morgan Stanley; Salomon Smith Barney Inc.; and U.S. Bancorp Piper Jaffray Inc. have each agreed to pay $1.65 million to the Securities and Exchange Commission, the New York Stock Exchange and the National Association of Securities Dealers, the regulators said Tuesday. “Each firm had inadequate procedures and systems to retain and make accessible e-mail communications,” the three regulatory organizations said in a statement. The agencies said the firms violated � 17a of the Securities and Exchange Act as well as NASD Rule 3010 and NYSE Rule 342. All three statutes require firms to preserve e-mails for three years and keep them accessible for two years. Instead of having an organized system where e-mail could easily be retrieved, some of the fined firms relied on disaster recovery systems to back up their e-mails. Consequently, many e-mails were “discarded” or “recycled” a few months after they were written, the regulators said. When kept, the e-mails “were often stored in an unorganized fashion,” according to the official SEC document ordering the firms to pay the fine. Other firms relied on employees to preserve copies of their e-mails on their computers’ hard drives. But “there were inadequate systems or procedures to ensure that employees did so for the requisite record-keeping period,” according to the order, which also said that the hard drives were often erased when employees left the firm. The firms also agreed to establish new procedures for preserving e-mail and inform the regulators within 90 days that a new system is in place. Copyright (c)2002 TDD, LLC. All rights reserved.

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