Stock Analysts’ Conflicts of Interest: The Road to ‘Independence’ in Stock Research
In the two years following the bursting of the high-technology and telecommunications stock “bubble,” various legal proceedings and regulatory actions have brought Wall Street to the brink of creating a “independent” stock research arm that purportedly would create a separation between the research and investment banking functions of major Wall Street firms. This new research scenario is largely a result of the confluence of the legal and regulatory proceedings and a dramatic loss in confidence by public investors in the quality and objectivity of research provided by their brokerage firms. This article examines the legal, legislative, and regulatory proceedings that have led to this dramatic change in the way Wall Street will conduct stock research of the future.
BACKGROUND
The fall of the technology-heavy Nasdaq market average from its high of 5,000 in March 2000 to below 2,000 in March 2001 has been attributed by many financial market observers largely to false and misleading “buy” recommendations issued by major brokerage firm former “superstar” Internet analysts such as Henry Blodget of Merrill Lynch and then former superstar telecom analyst Jack Grubman of Salomon Smith Barney (“SSB”). These analysts have been criticized for failure to disclose material conflicts of interest, namely, their firms’ financial interest in the stocks they were touting and the use of newly minted “valuation criteria” to justify their buy recommendations and high stock price targets.
During the 1998-2000 Internet stock market frenzy, major brokerage firms such as Merrill Lynch and SSB created media “superstar” Internet analysts as a means of enticing the investing public (who watch CNBC and other financial shows) to purchase Internet and high-technology stocks. The superstar analysts also were used to generate investment banking business for their firms. Thus, critics argue that the research “analysts” no longer perform objective unbiased analytical functions (as required by industry standards) but, instead, are mere “touters” or “cheerleaders” for the companies they cover.
The “newly minted” valuation criteria used by these analysts do not appear to comport with industry standards such as those of the Association for Investment Management and,Research (“AIMR”), which require that analysts use “objective” and “unbiased” research backed by proper and adequate due diligence. Instead, the Internet analysts have moved from the industry standard of “price to earnings” valuation methodology to price to “revenue multiples” to justify their valuations.3 In fact, many analysts have moved “off the charts” to value stocks based on “visits to websites,” “mouse clicks,” and other “statistics” that may bear no basis in reality and are not consistent with industry standards.
Lastly, research analysts and investment bankers are by regulation required to be separate and to maintain a “wall” between their functions. In reality, the “wall” no longer exists and analysts have been criticized for becoming mere tools for their investment banking departments to generate underwriting and other business.
SECURITIES LAW STANDARDS
The failure to disclose a material conflict of interest (a firm’s financial interest in the stock it is recommending—
such as investment banking fees) may serve as the basis for a securities fraud claim. The use of baseless valuation
criteria that are inconsistent with industry standards may constitute fraud and/or gross negligence on the part of an
analyst or a violation of New York Stock Exchange (“NYSE”) Rule 405, which requires a broker or analyst
to have a “reasonable basis” for making a recommendation. SEC Rule 10b-5 provides that it is unlawful for any
person to make an untrue statement of a material fact or to omit to state a material fact necessary to make the statement made, in the light of the circumstances under which it was made, not misleading, or to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security.
THE MERRILL LYNCH–HENRY BLODGET
ANALYST ARBITRATION
The first known legal attack on analyst conflicts of
interest occurred in March 2001 with the filing of an arbitration
case by a public investor against Merrill Lynch’s star
analyst Henry Blodget. In a groundbreaking NYSE arbitration
in which this author represented the claimants,
Kanjilal v. Merrill Lynch and Henry Blodget, NYSE Case
No. 2001-8941, Dr. Kanjilal, an Indian-American physician,
claimed securities fraud and gross negligence based
on Henry Blodget’s misleading buy recommendation on
Infospace, an Internet wireless company, which was issued
without disclosing Merrill Lynch’s financial interest in the
stock that Blodget was rating a strong “buy.” The case
alleged that Blodget issued his buy recommendation at a
time when Merrill Lynch stood to receive substantial
compensation in connection with its role as a financial
advisor for a merger of Infospace and Go2Net. Blodget’s
buy rating did not disclose Merrill Lynch’s financial
interest—a material fact that Dr. Kanjilal claimed affected
his decision to buy, sell, or hold the stock.
On July 20, 2001, Merrill Lynch reportedly agreed
to pay $400,000 in order to settle the arbitration claim,
thus ending the case.8 The case was reported worldwide
in the television and print media as a precedent-setting
case.
THE MERRILL LYNCH–NEW YORK ATTORNEY
GENERAL SETTLEMENT
Following the Kanjilal case settlement, this author
received a subpoena from the New York Attorney General’s
(“NYAG”) office seeking documents relating to the
Kanjilal case and the conflicts of interest at Merrill Lynch
alleged in the case. Kanjilal produced to the NYAG all
documents in the case. It has been reported that the Kanjilal
case was the catalyst which spurred on the investigation
of Merrill Lynch by the NYAG.
On April 8, 2002, NYAG Elliot Spitzer commenced
an action pursuant to the “Martin Act” against Merrill
Lynch & Co., Inc. (“Merrill Lynch”); Henry Blodget,
Merrill Lynch’s “superstar” Internet analyst; and other
analysts at the firm seeking immediate equitable relief to
“prevent further fraud, to protect the rights of the investing
public, and to educate it” pending completion by the
NYAG of its “investigation into Merrill Lynch and other
financial institutions.”
The Martin Act provides the NYAG with broad
criminal and civil powers to proscribe a wide array of
fraudulent conduct and practices in connection with the
sale of securities. Unlike the federal securities laws, no
purchase or sale of stock is required, nor is the NYAG
required to prove intent, reliance, or damages as elements
of a violation. There is no private right of action under
the Martin Act and the NYAG has exclusive jurisdiction
to enforce the Act.
The NYAG made public an affidavit and supporting
exhibits that contained information and “smoking gun”
e-mail evidence of alleged fraudulent conduct by Merrill
Lynch. The now-infamous Henry Blodget e-mails
show that Merrill Lynch’s stock research analysts privately
disparaged the Internet stocks they took public as “dogs,”
“crap,” and “pieces of junk” while touting these stocks to
the public with “strong buy” recommendations.
Following the press coverage of the NYAG investigation
and Merrill Lynch e-mails, Merrill Lynch’s chief
executive officer issued a public apology citing the e-mail
discussions as “inappropriate.”
On May 22, 2002, Merrill Lynch agreed to a settlement
of all charges with the NYAG. The settlement
terms required Merrill Lynch to pay a $100 million fine
to New York State and to other state regulators; to create
new policies to separate analysts’ pay from the firm’s investment-
banking business; to create a new committee to
oversee “objectivity” of stock picks; and to establish a
new system to monitor e-mails between investment
bankers and stock analysts.
While the Attorney General had sought a “restitution
fund” to compensate investors for losses relating to
purchases of Merrill Lynch Internet stocks, the settlement
did not contain any provision for restitution and instead
left investor compensation to be determined in individual
securities-industry arbitrations and class-action lawsuits.
Merrill Lynch claimed that the settlement did not contain
any “admission of wrongdoing,” but in a public “statement
of contrition” Merrill admitted that its employees
had engaged in “inappropriate communications,” some of
which “violated internal policies” and which “failed to
meet the high standards” of the firm.
SALOMON SMITH BARNEY’S RESPONSE TO
ANALYST CONFLICTS
Following the Merrill settlement, Salomon Smith
Barney (“SSB”) agreed to change the structure of its stock
research department to mirror the changes agreed to by
Merrill Lynch. SSB stated that it would create a research
review committee to oversee research analysts’ recommendations
and also would separate “the evaluation and
compensation of equity research analysts from investment
banking.”
SSB likely will be the target of investor lawsuits
largely based upon the research reports issued by its superstar
analyst Jack Grubman on telecom stocks, many of
which have filed for bankruptcy or are selling at a fraction
of their share prices from year 2000. As of October 2002,
the Central Records Depository (“CRD”) disclosed 45
separate legal proceedings by investors against Grubman
and SSB based on Grubman’s alleged conflicted research.
On October 30, 2002, Citigroup, SSB’s parent company,
announced that it had hired highly regarded analyst Sallie
L. Krawcheck, the chief executive of the independent
research firm Sanford C. Bernstein, to lead a separate division
for its stock research and brokerage business, even
before it reached an agreement with regulators on how its
analysts will operate. The announcement was apparently
an effort by Citigroup to demonstrate its determination
to quickly resolve the multiple investigations into its investment
banking and research conflicts of interest.
SEC ANALYST RULES
On May 10, 2002, following the NYAG investigation,
the Securities and Exchange Commission (“SEC”)
approved New York Stock Exchange (“NYSE”)11 and
National Association of Securities Dealers (“NASD”)12
rules to address conflicts of interest that are raised when
research analysts recommend securities in public communications
The rules require, among other things, that:
• firms are barred from tying their analysts’ compensation
to related investment-banking business;
• analysts must clearly disclose in public reports if they
own shares in companies they are recommending;
• analysts are prohibited from offering or threatening
to withhold a favorable research rating or specific
price target for a stock to attract investment banking
business from companies;
• research analysts cannot be supervised by the investment
banking department of the firm and analysts
and members of their households are barred from
investing in a company’s stock before it first is offered
to the public if the company is in a business sector
covered by the analyst.
The new rules follow widespread public criticism
that the SEC was too slow to act after conducting an
examination of analysts’ conflicts last year.
INVESTOR CLAIMS
Following the Kanjilal case and the NYAG investigation,
numerous investors have filed arbitration claims
and various class actions have been filed claiming that
investors were misled by analyst research that failed to disclose
material conflicts of interest.
In the case of the Merrill Lynch Internet stocks,
investors are arguing that the research was misleading
insofar as it did not disclose that the research analysts privately
disparaged the stocks while recommending that
the public buy these stocks. Claims against other firms,
such as SSB, argue that analyst recommendations were
misleading because they did not disclose the firm’s or the
analyst’s financial interest or compensation for recommending
stocks of companies with which their investment
banking departments had lucrative financial
arrangements.
In industry arbitrations, investors can forcefully argue
that the NYAG–Merrill Lynch settlement contains tacit
admissions that Merrill Lynch violated securities-industry
standards and its own internal policies in issuing misleading
research that failed to disclose material conflicts
of interest. These investors can reference the publicly
available “smoking gun” e-mails and likely can obtain
discovery relating to analyst compensation that may be
linked to generating investing banking revenues.
In claims filed against Jack Grubman of SSB,
investors have claimed that Grubman issued misleading
stock recommendations involving telecommunications
companies underwritten by SSB and that Grubman failed
to disclose to public investors that he was wearing “two
hats”—serving as a purportedly objective research analyst
and, at the same time, acting as an investment banker for
the same stocks that he rated.
The leading claim against Grubman was filed by this
author on behalf of an investor named George Zicarelli
with the NYSE who claimed that he lost over $455,000
in Global Crossing, a stock rated a strong “buy” by Jack
Grubman.13 Zicarelli claimed that his Salomon Smith
Barney broker “hyped” Jack Grubman as the telecom
“guru” who earned $20 million per year and was the
source to be followed regarding telecommunications
stocks. The broker sent Zicarelli Grubman’s research
reports as an inducement to buy Global Crossing.
Grubman gave Global Crossing a $70 price target and a
$35 billion market capitalization—a level exceeding General
Motors, Ford Motor Company, and Dow Chemical,
the three leading U.S. corporations at the time in terms
of market capitalization.
As a result of his losses, Mr. Zicarelli was forced to
file for bankruptcy in October 2001. Shortly thereafter,
Global Crossing filed for bankruptcy and the stock now
is at $0.10 a share and has a market capitalization of a
mere $85 million. The case will seek to hold Mr.
Grubman personally accountable for his misleading stock
recommendations. The case also will seek to obtain Mr.
Grubman’s personal e-mails as evidence in the case. The
case is presently scheduled for an arbitration hearing in
April 2003.
STATE OF MASSACHUSETTS PROCEEDING
AGAINST CREDIT SUISSE FIRST BOSTON
On October 21, 2002, the Commonwealth of Massachusetts
filed an administrative complaint against Credit
Suisse First Boston (“CSFB”) alleging that CSFB misled
investors by allowing its investment banking division, in
particular, its star investment banker Frank Quattrone, to
exert undue influence on the firm’s research department.
In the complaint, Massachusetts accused CSFB of routinely
disparaging stocks privately while publicly recommending
them to public investors and of allowing
investment bankers to control almost every aspect of the
research process. Further, the complaint alleges that the
firm “bribed” clients with allocations of hot initial public
offerings (“IPOs”) in an effort to win investment banking
business.
To show an example of research “doublespeak,”
known internally at the firm as the “Agilent two-step,”
CSFB analyst Tim Mahon told a colleague in an e-mail
how to handle his desire to slap a “neutral” rating on a
company stock: “That’s when in writing you have a buy
rating . . . but verbally everyone knows your position.”
The CFSB complaint mirrors the NYAG investigation,
which revealed the damaging e-mails of Merrill Lynch
analysts and investment bankers.
THE STATE OF UTAH’S INVESTIGATION
OF GOLDMAN SACHS
On June 20, 2002, the State of Utah announced that
it was investigating Goldman Sachs as part of a national
probe of the securities industry following allegations that
Merrill Lynch analysts routinely offered false advice to stock
investors. The Utah, Massachusetts, and New York actions
are part of a coordinated effort by the North American
Securities Administrators Association, Inc. (“NASAA”), an
organization composed of securities regulators from the
50 states and North American countries, who have allocated
responsibility for investigating firms to different state
regulators. NYAG Elliot Spitzer appears to be the informal
head of the group dealing with the SEC and the 10 leading
Wall Street firms in an effort to reach a global settlement
of the investigations by the various states and the SEC.
NASD COMPLAINT AGAINST SSB
AND GRUBMAN
On September 23, 2002, the NASD fined SSB $5
million for issuing misleading research reports and filed a
separate complaint against its former telecommunications
analyst Jack Grubman. The NASD claimed that SSB’s
reports failed to adequately disclose the risks of investing
in Winstar Communications, Inc. (“Winstar”), a telecommunications
firm that filed for bankruptcy protection last
year. The NASD claimed that the research reports contained
praise for Winstar, while belittling other analysts
who were critical of the company. The legal basis of the
complaint was a charge that SSB and Grubman had no
“reasonable basis” for their recommendations and price
targets in violation of NASD rules.
The NASD said that the settlement—the third
largest in its history—resolves but one single investigation
into SSB’s Winstar reports and did not address other
larger issues related to SSB’s research analysts that are currently
pending at the NASD and with other state regulators.
The NASD said Grubman’s research reports
recommended Winstar as a “buy,” SSB’s top rating, with
a 12- to18-month price target of $50 even as the stock
fell to $0.14 per share on April 17, 2002, from about $20
per share on January 25, 2001. The NASD also claimed
that Grubman and his assistant notified Winstar management
before issuing research reports and financial models,
even sending them to the executives for approval before
making them public. In settling the matter, SSB neither
admitted nor denied the NASD’s findings. Grubman
apparently intends to contest the charges before an NASD
administrative hearing.
NYAG LAWSUIT SEEKING RESTITUTION
OF IPO AND STOCK OPTION PROFITS
On October 1, 2002, NYAG Spitzer filed a lawsuit
in New York State Court against five corporate executives
of telecom companies underwritten by SSB seeking
repayment of funds garnered through alleged profiteering
in IPOs and “phony” stock ratings. According to the suit,
SSB obtained the underwriting business of these executives’
companies while at the same time offering those
executives access to lucrative IPO shares. Once the IPO
share price soared in active trading, the stocks often were
sold, netting the executives millions of dollars in personal
profits. The relationship between SSB and the executives
purportedly rested on a presumption that SSB would
deliver favorable stock ratings for the executives’ companies
as an inducement and reward for obtaining the investment
banking business. The case against the executives is
based on New York’s Martin Act and the Executive Law.
THE SARBANES-OXLEY ACT
OF 2002 ANALYST RULES
In July 2002, in response to widespread reports of
alleged fraud at major public companies (Enron,
WorldCom, Adelphia, etc.), Congress passed by a nearunanimous
vote the Sarbanes-Oxley Act of 2002 (the
“Act”). The Act institutes broad reforms concerning
accounting and auditor oversight, corporate governance,
and executive responsibility.
Significantly, Section 501 of the Act, entitled “Treatment
of Securities Analysts by Registered Securities Associations
and National Securities Exchanges,” dealt with the
issues of analysts’ conflicts of interest. The Act mandates
the adoption of rules by the SEC or national securities
exchanges or registered securities associations to promote
greater objectivity and independence of stock analysts and
compels analysts to disclose in public appearances and
research reports any potential conflicts of interest, including
investment banking services, provided to a company in the
year proceeding the publication of a recent report on such
company.
Pursuant to the Act, the SEC will promulgate regulations
that would require research analysts to certify the
truthfulness of their views and research reports in public
appearances and to disclose whether they have received
any compensation related to the specific recommendation
provided in those reports and appearances. The
NASD and NYSE have proposed similar rule changes
relating to the conduct of analysts and their firms and the
relationship of analysts with their firms’ investment
banking departments.
COURT DECISIONS INVOLVING ANALYST
CONFLICTS OF INTEREST
Several federal court decisions have dealt with the
issue of analysts’ conflicts of interest. In the leading case
on point, Credit Suisse First Boston Corp. Securities Litigation,
14 the court held that an analyst’s research report could,
in fact, serve as the basis for a securities fraud complaint
where the report made false or misleading statements in
connection with stocks and that the firm that issued the
research report failed to disclose that it had a “short” position
in the securities which were being analyzed.
In that case, a CSFB analyst issued a report entitled
“Trading Notes: The Year 2000 Bubble,” which recommended
the sale of Data Dimensions and Viasoft stock,
two companies involved in attempting to solve the Year
2000 computer problem. The report stated that the software
companies it highlighted could not fix the problem
and had no possibility of earning close to what the market
capitalization indicated. The report, however, failed to
disclose that CSFB had a significant “short” position in
the stock of the two companies and stood to profit if the
stocks’ price fell as a result of the report.
The defendants moved to dismiss the complaint
claiming that the alleged misstatements in the report were
merely “statements of opinion” that are not verifiably
false and are thus not actionable. In denying the motion
to dismiss, the court held that projections and opinions
could provide the basis for liability under Section 10(b)
and Rule 10b-5 and that forward-looking statements or
predictions can be considered “facts” within the meaning
of the rule’s proscription of fraud. The court also observed
that the failure to disclose the firm’s short position in the
stocks could constitute a material omission sufficient to
support a securities-fraud claim.
Investors can expect that brokerage firms will claim
that analysts’ “recommendations” cannot serve as the basis
for a fraud claim or for investor recovery. Investors can
counter by citing the case of Korinsky v. Salomon Smith
Barney in which Judge Shirley Kram of the Southern District
of New York dismissed a class action based on alleged
misleading analyst recommendations but held that such
allegations “regarding an alleged scheme by defendants
to issue artificially positive ratings on AT&T stock rise to
the level of material misrepresentations or omissions
regarding the value of the securities.”
In Korinsky, the class plaintiffs claimed that on
November 29, 1999, Grubman issued a “buy” rating for
AT&T at a time when AT&T was beginning to prepare
for a large public offering of stock and was looking for a
number of different investment banks for underwriting
assistance with that stock offering. The plaintiffs further
alleged that SSB and Grubman breached their fiduciary
duties to SSB’s retail customers by issuing and maintaining
positive recommendations on shares of AT&T despite the
defendants’ knowledge that AT&T faced serious financial
problems. This decision is significant because it confirms
that an analyst’s buy recommendations can, in fact,
be the basis for a securities fraud claim.
Lastly, investors can expect that in claims asserted
against Morgan Stanley Dean Witter (“MSDW”) and
Mary Meeker that MSDW will rely upon a decision by
Judge Milton Pollack of the Southern District of New
York that dismissed “without prejudice” class-action claims
filed against MSDW and Meeker for alleged misleading
research on the grounds that the suit contained pleading
improprieties, which Judge Pollack described as “gross
and unrestrained.”16 Although given leave to replead, the
plaintiffs chose not to do so. Thus, the decision was based
on the pleadings and was not a decision on the merits of
the claims.
PROPOSED GLOBAL SETTLEMENT
OF RESEARCH INVESTIGATIONS
The investigations into stock research conflicts on
Wall Street are likely to lead to the largest settlement cost
ever for the securities industry. The total cost—including
fines, civil litigation liability, and payments to finance
independent stock research for small investors—could
total as much as $2 billion according to reports from regulators.
The proposed settlement results from meetings
among NYAG Elliot Spitzer, federal securities regulators,
and 10 major Wall Street firms who agreed in principle
on a broad plan to overhaul the way securities firms provide
research on stocks to small investors. The plan would
create a panel to oversee independent stock research that
brokerage firms would be required to provide to individual
investors in addition to their own analysts’ recommendations.
Under the plan, each firm would be
expected to adopt the new rules as part of the separate
enforcement actions to settle investigations by the regulators
who are examining whether brokerage firms misled
small investors with overly optimistic research on investment
banking clients during the stock market bubble of
the 1990s. The plan also would require the firms to fund
independent third-party research that would be distributed
to retail investors. Significantly missing from the settlement,
however, is any fund for restitution of investors
who claim that they were defrauded by misleading analyst
recommendations.
CONCLUSION
In the two years since the year 2000 stock market
bubble burst, there have been numerous legal and regulatory
proceedings that highlighted the issue of conflicts
of interest in the research and investment banking process
at major Wall Street firms. Through the initiation of customer
arbitrations and regulatory proceedings, the conflicts
of interest and damaging internal e-mails have been
publicly released and have pressured Wall Street firms to
reach a broad settlement with the regulators and to change
the way that stock research takes place in the future.
As an attorney who represents public investors and
is called upon by the media to comment on the public
investors’ views on securities issues, I believe that the settlement
proposed is not in the interest of public investors.
First, the settlement in no way provides for a global restitution
fund to compensate the victims of misleading stock
research—millions of public investors who have lost a
large portion of their retirement, life savings, and discretionary
income following biased research. Such restitution
may come in the form of numerous customer
arbitrations against brokerage firms and their analysts and
in class-action litigation. It is likely that the litigation and
arbitrations will drag on for the next several years with
mixed results; investors will win some cases and lose others.
At this time, the details of the proposed “independent”
research that will result from the settlement are
unclear. If there continues to be a link between the compensation
of analysts and the generation of investment
banking revenues at major Wall Street firms, changes will
have been superficial and will not have resolved the serious
problem of analyst conflicts of interest. Public investors rely
upon stock research in investing their life and retirement
savings with brokerage firms. It is unclear whether this new
“independence” will have the result of restoring public
confidence in the stock market.
In sum, it appears that the regulators will “wipe the
slate clean,” allowing the “guilty” to escape with manageable
monetary penalties, and the victims of misleading
research—public investors—will receive nothing from the
settlement. The settlement also highlights the need for
new leadership at the SEC by a chairman who is committed
to favoring the interest of public investors, whom
the SEC is charged to protect, rather than the interests of
major Wall Street firms.
ENDNOTES
1Gtetchen Morgensen, “How Did So Many Get It So
Wrong?” The New York Times, Business Section, December
31, 2000.
2Association for Investment Management and Research,
Standards of Professional Conduct for Chartered Financial Analysts.
3Salomon Smith Barney Research Report of March First
(April 26, 2000). (“In late 1999, the investment community
adopted revenue multiples as a valuation method for the Internet
and Technology providers’ stocks.”)
4Peter Elkind, Mary Danehy, Jessica Sung, and Julie
Schlosser,“Can We Ever Trust Wall Street Again? Where Mary
Meeker Went Wrong,” Fortune, May 14, 2001.
5Id.
617 C.F.R. 250.10b-5.
7Charles Gasparino, “All-Star Analyst Faces Arbitration
After Internet Picks Hit the Skids,” Wall Street Journal, March
2, 2001.
8“Merrill Settles Arbitration Claims Over Analyst’s Tech
Stock Recommendations,” Securities Regulation Law Reporter,
Vol. 30, No. 30 (July 30, 2001).
9Nicholas Varchaver, “Lawyers Target More Than Merrill,”
Fortune, June 17, 2002.
10The “Martin Act” is the General Business Law, Article
23-A. The case against Merrill Lynch was initiated by the filing
of an affidavit by Eric R. Dinallo, chief of the Investment Protection
Bureau of the State of New York, together with various
exhibits.
11The SEC approved amendments to NYSE Rule 472
(“Communications with the Public”) and Rule 351 (“Reporting
Requirements”).
12The SEC approved new NASD Rule 2711 addressing
Research Analysts and Research Reports.
13Charles Gasparino, “As Lawyers Target Analysts, Now
It’s Grubman’s Turn,” Wall Street Journal, April 12, 2002.
(Investor filed claim against SSB and Grubman claiming analyst
research on Global Crossing failed to disclose conflict of
interest regarding analyst’s compensation for investment banking
business.)
141998 U.S. Dist. LEXIS 16560; Fed. Sec. L. Rep. (C.H.)
P. 90, 306 (October 20, 1998).
152002 U.S. Dist. LEXIS 259 (S.D.N.Y. January 9, 2002).
16Pludo v. Morgan Stanley Dean Witter and Mary Meeker,
01 Civ. 7072 (August 21, 2001).
17Charles Gasparino, “Analyst Inquiry May Cost Wall
Street $2 Billion,” Wall Street Journal, October 28, 2002.