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After innumerable false starts, stops, and shuttle rides to Washington, Wall Street firms agreed Friday to pay regulators $1.4 billion in fines for their role in fueling the market bubble — and they may have to cough up the money in a matter of months. Of the $1.4 billion, $900 million is going toward “retrospective relief,” or fines for past actions. Another $450 million will fund independent research, and $85 million will go toward investor education. The firms involved in the settlement are Credit Suisse First Boston, Salomon Smith Barney, Merrill Lynch & Co., J.P. Morgan Chase & Co., Goldman Sachs & Co., Morgan Stanley, Bear Stearns & Co., Lehman Brothers Inc., Deutsche Bank Securities and UBS Warburg. Because the settlement was announced before all documents were finalized, the securities firms will not have to hand over the money immediately. But, after a press conference in New York on Friday, Eliot Spitzer, the New York state attorney general who led the crusade against Wall Street’s research and IPO allocation practices, said he expects to set a deadline for the firms to pay the fines within the next couple of months. Spitzer and New York Stock Exchange head Richard Grasso declined to comment on whether the fines will be tax-deductible. Hit hardest will be Solly, which will have to pay a total of $400 million, and Credit Suisse First Boston, which will have to pay $200 million. Merrill Lynch has to pay $100 million, in addition to the $100 million it paid earlier this year as part of another settlement with Spitzer. Meanwhile, under a settlement still being negotiated with Jack Grubman, Solly’s deposed star telecom analyst could be forced to pay $15 million in fines and be barred from the securities industry for life, Spitzer said. Mel Weiss, the lead lawyer in several IPO allocation class actions lawsuits leveled against Wall Street, said he was pleased with the outcome. “I think it’s a terrific resolution of an enforcement action,” Weiss said. “Although I happen to think spinning and the use of the analysts was always wrong, so to say this is a new rule that will take place in the future is a misnomer. “ Weiss said that documents due to be released in February by Spitzer will be of little use to plaintiffs’ lawyers, since they would have had access to them anyway. He added, however, that the release of those documents will boost the individual complaints of investors against the brokerages. The regulators presented the settlement as a year-end gift to Wall Street. “It is time to close this, perhaps one of the darkest chapters in the history of finance,” Grasso said at the press conference. The fines will be split among the passel of regulators that have pursued the firms for over a year. The Securities and Exchange Commission, National Association of Securities Dealers and NYSE will get $450 million of the “retrospective fines” in the settlement, while the other $450 million will go to the 50 states, as represented by the North American Securities Administrators Association. New York will get $40 million in the settlement. Spitzer said he will explore ways of creating a restitution fund for individual investors, but did not promise it would work. “I’m not Publisher’s Clearing House,” Spitzer quipped at the news conference. “[Investors] are not getting a check in the mail any time soon.” The investment banks themselves will have to put $450 million toward funding independent research, a project that will be tried out for at least five years. The firms will put the money into an escrow account that will be used to help independent research firms produce research just for individual investors. The regulators at the conference promised that more rules are on their way. Related Chart: Spitzer’s Wall Street Settlement Payments Copyright �2002 TDD, LLC. All rights reserved.

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