September 23, 2020

FINRA fines banks for mixing research, investment banking biz


Pin It

Finra-Building-LogoBy Scott Flaherty, From The Litigation Daily

A decade after a crackdown that was supposed to rein in research conflicts at Wall Street banks, the industry’s self-regulator won penalties Thursday from 10 leading banks accused of using their research analysts to drum up investment banking business.

Goldman Sachs & Co., JP Morgan Securities LLC, Citigroup Global Markets Inc. and seven other financial institutions agreed to pay a combined $43.5 million to resolve claims by the Financial Industry Regulatory Authority that they offered favorable research to Toys “R: Us Inc. in order to curry favor with the retailer prior to a planned 2010 public stock offering. The banks neither admitted nor denied the allegations.

’s research analyst conflict of interest rules make clear that firms may not use research analysts or the promise of offering favorable research to win investment banking business,” , FINRA’s executive vice president for regulatory operations, said in a statement Thursday. “Each of these firms used their analyst to solicit investment banking business from Toys “R” Us and offered favorable research.”

The FINRA announcement comes about a decade after former New York Attorney General Eliot Spitzer led an effort to end such conflicts. In 2003, a group of 10 financial institutions paid $1.4 billion to resolve claims by Spitzer’s office and other regulators that they had allowed their research analysts to be used as tools of their investment banking businesses. The 2003 settlement required the banks to “sever the links between research and investment banking.”

As The New York Times’ DealBook pointed out Thursday, the earlier settlement included many of the same banks targeted by FINRA.

The FINRA investigation swept in platoons of lawyers from the banks’ favored firms. The lineup, according the settlement papers, included Sullivan & Cromwell (for Goldman); Richards Kibbe & Orbe (for JPMorgan); Sidley Austin (for Citi); Latham & Watkins (for Barclays Capital Inc.); Cahill, Gordon & Reindel (for Credit Suisse Securities (USA) LLC); Fried, Frank, Harris, Shriver & Jacobson (for Deutsche Bank Securities Inc.); Morgan, Lewis & Bockius (for Merrill Lynch Pierce Fenner & Smith Inc.); Paul, Weiss, Rifkind, Wharton & Garrison (for Morgan Stanley & Co.); K&L Gates (for Wells Fargo Securities LLC); and Proskauer Rose (for Needham & Co.).

Photo by

For more on this story:

Print Friendly, PDF & Email
About ieyenews

Speak Your Mind