Posted on: Friday, April 16, 2004

Budget may add settlement money

By Sean Hao
Advertiser Staff Writer

Lawmakers will likely transfer Hawai'i's $4.1 million slice of settlement money paid by 10 major Wall Street brokers last year to the state's general fund instead of using it to educate investors as originally planned.

The money was Hawai'i's share of about $500 million paid to states under a settlement reached between the Securities and Exchange Commission and Citigroup, Credit Suisse First Boston and other brokers involved in potential conflicts of interest between broker research and investment banking businesses.

The allegations of fraud undermined investor confidence in the markets and state officials said last year the money would be used to step up investor education and securities enforcement efforts.

However, that money is part of $32 million set to be transferred from the Department of Commerce and Consumer Affairs Compliance Resolution Fund to balance the state budget. That move also would place the agency's finances within the state's general fund.

DCCA Director Mark Recktenwald said he offered the settlement money to lawmakers in an attempt to keep the rest of the money in his agency's special fund. However, the Legislature could end up taking the entire $32 million. The Senate approved the measure yesterday and a House vote is scheduled for today .

"We do have funding to continue (investor education and securities enforcement)," Recktenwald said. "But this could well have been used for those purposes."

Hawai'i isn't alone in using the Wall Street settlement money for other purposes. Other states have used the money for fixing potholes and building schools.

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