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Research Analyst Global Settlements

Restitution Payments to Investors from the
Missouri Global Research Analyst Settlement

Dozens of Missouri investors and investment funds recently received restitution checks from the Office of Secretary of State Robin Carnahan through execution of a restitution plan related to the Global Research Analyst Settlement.

The Global Research Analyst Settlement stemmed from conflicts of interest between the research analysis and investment banking arms of investment firms. In the late 1990s and early 2000s, research analysts at major financial institutions were publicly giving stocks “buy” ratings when their employers were hoping to underwrite and collect fees from new offerings by the companies’ whose stocks were being rated. At the same time, those same analysts were in some instances privately calling the securities poor buys.

State regulators, the U.S. Securities and Exchange Commission ("SEC"), NASD, Inc., now known as the Financial Industry Regulatory Authority ("FINRA"), and the New York Stock Exchange, Inc. ("NYSE") investigated potential conflicts of interest in equity research analysis that culminated in the Global Research Analyst Settlement. The Global Research Analyst Settlement includes the following components: (1) structural reforms in the relationship between investment banking and research; (2) approximately $85 million for investor education programs; (3) approximately $450 million for independent investment research; (4) approximately $500 million paid to the states; (5) twelve separate distribution funds totaling $432.75 million created in the SEC actions, which consist exclusively of monies paid in resolution of the actions brought by the SEC, NASD, and NYSE; and (6) a preservation of rights for investors to pursue, to the extent otherwise available, any other remedy or recourse against the settling parties.

Missouri’s share of the state settlement amounted to more than $7 million. While most states directed their settlement amounts into general revenue or investor education funds, regulators in the Missouri Securities Division, a part of the Secretary Carnahan’s office, determined that the best use of its recovery was to provide restitution to Missourians who were damaged by the conflicts.

Secretary Carnahan and the Securities Division have worked closely with the expert administrators of the Federal Settlement Distribution Plan to determine which Missouri investors should receive restitution, and how much. After a federal judge approved various components of the Federal Settlement Distribution Plan in a series of rulings, the Securities Division worked with federal plan administrators to develop data on payouts to Missouri investors. The federal plan administrators’ complex investor identification process and loss calculation formulas were adopted in Missouri as the best and exclusive approach for determining fair restitution.

In late May 2008, the plan administrators and several of the investment firms released Missouri payee information to the Securities Division. In August 2008, Secretary Carnahan’s Securities Division in turn distributed over $1.8 million to the identified investors.

For information on the Federal Settlement Distribution Plan and to track ongoing developments with remaining federal distribution funds, visit http://www.globalresearchanalystsettlement.com/. You can read the consent orders that led to the recovery of restitution for Missouri investors below. For more information on the Missouri Securities Division’s payout to Missouri investors, you can contact the Division at (573) 751-4136.

View the press release concerning the recent payouts

 

Consent Orders

 

Restitution Payment Orders

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For more information, please contact Securities at (573) 751-4136 or securities@sos.mo.gov.