Further Information Provided Regarding the Brokerage Firm Analysts' Global Settlement Fund

ecently, the Securities and Exchange Commission (SEC) posted on its website (www.sec.gov) "Questions and Answers Regarding the Distribution of Funds in the Analysts Cases."

As background, in last month's column I addressed which brokerage firms committed wrongs against investors (they are: Credit Suisse First Boston (CSFB); Merrill Lynch; Salomon Smith Barney; Morgan Stanley Dean Witter; Bear Stearns; Goldman Sachs; Lehman Brothers; Piper Jaffray; UBS PaineWebber; and J.P. Morgan). I also outlined the many stocks covered in the global settlement. Finally, I recommended that investors consider filing arbitration claims in addition to participating in the global settlement. Total funds available for distribution from the global settlement are $399 million.

The latest information provides additional details regarding the distribution of funds. There are five noteworthy points.

First, although the SEC has not yet appointed a fund administrator, it is doing so "as soon as practicable". Once the SEC does so, that person will prepare distribution plans for approval by the SEC and a court of law. The fund administrator will determine the final terms of distribution. The entire process, through funds distributions to investors, probably will take one and one-half years.

Second, there actually will be not one but ten different distribution funds. For each brokerage firm there will be a fund (with the exception of Merrill Lynch, because its $100 million penalty has been paid to the states and not to the SEC's distribution fund). The distribution funds are:

Citigroup Global Markets (Salomon Smith Barney and Jack Grubman): $157.5 million;
CSFB: $75 million;
Bear Stearns: $25 million;
Goldman Sachs: $25 million;
J.P. Morgan: $25 million;
Lehman Brothers: $25 million;
Morgan Stanley Dean Witter: $25 million;
UBS PaineWebber: $25 million;
U.S. Bancorp Piper Jaffray: $12.5 million; and
Henry Blodget (to be applied to claims filed by Merrill Lynch customers): $4 million

Third, the fees, costs and expenses of the fund administrator will be borne by the brokerage firms. This is a significant fact as those expenses may approximate $100 million.

Fourth, it is expected that the brokerage firms will provide account information, including names, addresses, and purchase and sales dates of stocks, directly to the fund administrator. At this time, investors need not submit any information.

Fifth, there are certain minimum requirements that investors must meet before receiving any money. They are that the investor must have bought the stock through the particular brokerage firm that improperly promoted the stock; the investor must have lost money; and the investor must have bought the stock during the "relevant period" as defined by the fund administrator. Generally, the relevant period will relate to how soon after the misleading research opinion the investor bought the stock.

I will discuss further information as it becomes available to assist investors file claims to recover their investment losses.

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James J. Eccleston is a securities attorney, representing investors as well as brokers and brokerage firms nationwide in arbitration, litigation and regulatory matters. He maintains an informative website at www.FinancialCounsel.com. He is an equity partner with Shaheen, Novoselsky, Staat & Filipowski and can be reached at 312-621-4400.