In accordance with Governor Lamont's emergency declaration, employees and the public are asked to observe social distancing measures to ensure communal safety and to slow the spread of the novel coronavirus (COVID-19). People are asked to work from home and telecommute wherever possible. Adhering to these instructions, the Department of Banking has closed its offices to the public. However, agency staff will continue to provide services to consumers and industry through telework. When contacting the Department, please use electronic communication whenever possible. Agency staff will continue to check voicemails during this time. Consumers are encouraged to use our online form for complaints. If you are unsure where to send an inquiry, you may send it to Department.Banking@ct.gov and it will be routed appropriately. Thank you for your patience during this time.

UBS Warburg LLC and UBS PaineWebber Inc. Fined
for Failing to Maintain Analyst Independence

April 28, 2003

Banking Commissioner John P. Burke today announced that securities regulators, including Connecticut, had reached a settlement with nine of the nation's largest investment firms. The settlement resulted from investigations into potential conflicts of interest and improper influence between research analysts and investment bankers at those firms.

Commissioner Burke said, "These settlements represent the conclusion of a shameful chapter in the history of our financial markets." The industry reforms agreed upon in this settlement will encourage more objective research and stronger protection for the nation's investors.

The nine firms against whom enforcement actions were concluded today are:

  • Bear, Stearns & Co. Inc.
  • Credit Suisse First Boston, LLC
  • Goldman Sachs & Co.
  • Lehman Brothers, Inc.
  • J.P. Morgan Securities, Inc.
  • Morgan Stanley & Co. Incorporated
  • Citigroup Global Markets Inc. f/k/a Salomon Smith Barney, Inc.
  • UBS Warburg LLC and UBS PaineWebber
  • U.S. Bancorp Piper Jaffray Inc.

A tenth firm, Merrill Lynch, Pierce, Fenner & Smith, Incorporated previously entered into an administrative consent order with the Department of Banking on September 30, 2002 settling similar charges.

That settlement followed joint investigations by a coalition of states, coordinated by the North American Securities Administration Association; the Securities and Exchange Commission; the New York Stock Exchange; the National Association of Securities Dealers, and the New York Attorney General’s Office. The Securities Division of the Connecticut Department of Banking participated in the investigation of UBS Warburg and UBS PaineWebber, as part of a team of state securities regulators from Arizona, Illinois, Nevada and Oklahoma.

Commissioner Burke further stated, "The consequences of the firms' unethical activity will continue to be felt until public confidence is restored in the marketplace." The Commissioner expressed confidence that "this will begin the healing process in an environment in which some $7 trillion has been lost in market wealth by the nation's investors."

The goal from the outset had been to restore public confidence by changing the investment banking and research culture, meting out penalties and providing investors with independent research. The settlement will require the firms to pay $1.4 billion, including penalties of $437.5 million, disgorgement of $437.5 million, payments of $432.5 million to fund independent research and payments of $80 million to fund investor education. The disgorgement amount will be deposited in a fund to provide payment to investors.

Commissioner Burke commented, "While the amounts allocated to penalties and a fund for investors may seem substantial to some, they may be of little recompense to the nation's 85 million investors, considering the staggering losses incurred." Burke added that "aside from the direct market participants, state governments were also negatively impacted as revenues from capital gains all but vanished, exacerbating state deficits."

The penalty portion directed to the states will be divided among the fifty states, the District of Columbia and Puerto Rico based upon population with an established minimum. Based upon that formula, Connecticut is expected to receive in excess of $4 million in penalties, Burke noted.

"Any meaningful restitution for investors was incalculable because victims could not be identified," Burke added. By contrast, in other actions taken by the Department, Securities Division staff had been able to establish a direct relationship between the investors and the wrongdoers.

Commissioner Burke expressed his appreciation to Connecticut Attorney General Richard Blumenthal and his staff for their assistance and cooperation during the course of this investigation.