State gets $3.63M in broker settlement

By Sean Hao
Advertiser Staff Writer

Hawai'i will get nearly $3.63 million under a $1.4 billion settlement reached this week with 10 major Wall Street brokers.

The money will go into a special fund used for investor education and enforcement of securities laws, said Ryan Ushijima, the state's commissioner of securities.

Overall, states will receive nearly $500 million under the settlement set up by the Securities & Exchange Commission with Citigroup, Credit Suisse First Boston, Merrill Lynch & Co. and other brokers. Nearly $400 million will be set aside for restitution for individual investors who lost money because of potential conflicts of interest between broker research and investment banking businesses.

The $3.63 million coming to Hawai'i excludes $500,000 the state received under a separate settlement with Merrill Lynch last year. In addition to this money, the settlement "really changes the way these investment banking firms operate so they'll put investors before banking fees," Ushijima said. "Hopefully it will restore confidence in the markets."

The money likely would allow the state to step up investor education and securities enforcement efforts, Ushijima said. However, the settlement money will go into a special fund that has been used in the past for general fund uses, he said.

Other states plan to use their settlements to pay for a variety of programs, including fixing potholes and building schools. However, so far few seem willing to direct any of the money to investors harmed by overly bullish stock research.

In recent days, some members of Congress have begun calling on states to kick in at least some of the money to investors. And Stephen Cutler, the SEC's enforcement chief, has invited the states to chip in to the SEC's restitution fund.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.