Jewish World Review Dec. 23, 2002 / 18 Teves, 5763

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Consumer Reports

NY's AG deserves credit for settlement | New York Attorney General Eliot Spitzer has succeeded in doing what neither the Securities and Exchange Commission nor the Justice Department had the stomach to attempt. Wall Street's conflicts of interests have been resolved - legally, at least - with a global settlement that ends an eight-month investigation of the top investment firms.

The global settlement means that Wall Street firms will have to pay out $1.4 billion in penalties and funds for investors. We don't yet know how much money will be available for the restitution of losses incurred by investors because of Wall Street's conflicts of interests, but you can bet it won't be much, and it certainly won't be enough.

This settlement is large enough to get the attention of an industry that will likely earn more than $20 billion worldwide this year. The leading brokerages now understand that transparency is not an option; it's a legal obligation.

And while Spitzer's settlement isn't perfect, it is important and even historic. It does alter the way Wall Street does business. Research analysts will be insulated from those nasty investment bankers. Those investment bankers will have to go on their pitches and their dog-and-pony shows on their own, without analysts and the promises of favorable stock recommendations.

Brokerages won't be able to hand out those lucrative IPO shares to corporate executives and directors who make relationship decisions with Wall Street firms. And for a period of five years, each of the brokerages will have to provide research from independent sources to all of their brokerage customers.

In other words, you and I, as investors who have an account with any of these firms, will now have the firm's research as well as independent research. We should, in short order, find out who's delivering the best recommendations on buying and selling stocks.

But the big lesson from all of this is that, as investors, we're individually responsible for all of our investment decisions, no matter whose research we rely on.

Will this global settlement repair investor confidence? Will it solve all of the problems on Wall Street? Absolutely not. But it does go a long way towards leveling the playing field, and it even restores a premium to integrity on Wall Street.

So, Eliot Spitzer wins the day. But he's certainly not the only winner here. Wall Street firms write the checks and put behind them one of the ugliest episodes in our business history. Their stocks went up Friday when the settlement was announced. And the Securities and Exchange Commission, New York Stock Exchange and Nasdaq have been taught a valuable lesson: that their failure to act on obvious conflicts of interest will lead not only to lower markets and lower investor confidence, but will also lead to someone else taking on their regulatory responsibilities. In this case, it was Spitzer, the man Wall Street first tried to dismiss as unsophisticated and then as an overly ambitious state politician mucking about in matters of national importance.

Thanks, Eliot, for a job well done.

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Lou Dobbs is the anchor and managing editor of CNN's "Lou Dobbs Moneyline." Comment by clicking here.

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