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The Honolulu Advertiser

Posted on: Tuesday, December 24, 2002

EDITORIAL
Brokerages do penance to the tune of $1.4 billion

Almost as stunning as the size of the penalties 10 of the nation's top brokerages have agreed to pay to resolve conflict-of-interest allegations is the contention by some critics that it's too little, too late.

The e-mail evidence compiled by New York state's attorney general, Kirk Spitzer, was so damning that the top Wall Street firms probably consider themselves lucky to escape this lightly. The agreement calls for them to pay $900 million in fines, set aside $450 million for independent research and spend $85 million for investor education. The investment houses also say they will establish new rules to foster the independence of their analysts and restore their credibility.

It's notable that Spitzer's action against the brokerages was joined a year late by the now-rudderless Securities and Exchange Commission, which under the Bush administration has yet to demonstrate sincere concern for the fleecing that ordinary investors endured as analysts touted stocks that they knew to be turkeys.

The settlement should prove beneficial to investors, but any set of rules or agreements will be wholly ineffective until the SEC makes up its mind to enforce them.

Those who think the settlement is too light should consider that the extensively damning record compiled by Spitzer will become available next month to the dozens of class-action plaintiffs who are waiting to pile on.

The settlement also accomplishes an essential bit of consumer education: "Investors are now on notice," intoned The New York Times, "that unscrupulous hucksterism is a part of any frenetic bull market."