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STATE OF
OFFICE OF
SECURITIES
121 STATE HOUSE STATION
AUGUSTA, ME 04333
In
the matter of BEAR,
STEARNS & CO. INC., Respondent. |
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No. 03-101 CONSENT ORDER |
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CONSENT
ORDER
WHEREAS, Bear, Stearns & Co. Inc. (“Bear
Stearns” or the “Firm”) is a broker-dealer licensed in the State of
WHEREAS, coordinated
investigations into Bear Stearns' activities in connection with certain
conflicts of interest that research analysts were subject to during the period
of July 1, 1999 through June 30, 2001 have been conducted by a multi-state task
force and a joint task force of the U.S. Securities and Exchange Commission,
the New York Stock Exchange, and the National Association of Securities Dealers
(collectively, the "regulators");
WHEREAS, Bear Stearns has cooperated with regulators conducting the investigations by responding to inquiries, providing documentary evidence and other materials, and providing regulators with access to facts relating to the investigations;
WHEREAS, Bear Stearns has advised
regulators of its agreement to resolve the investigations relating to its
research practices;
WHEREAS, Bear Stearns agrees to
implement certain changes with respect to its research and banking practices,
and to make certain payments; and
WHEREAS, Bear Stearns elects to permanently waive any right to a hearing and appeal under 32 M.R.S.A. §§ 10708-10709 with respect to this Consent Order (the “Order”);
NOW, THEREFORE, the Securities
Administrator of the State of Maine Office of Securities, as administrator of
the Revised Maine Securities Act, 32 M.R.S.A. §§ 10101-10713, hereby enters
this Order:
I. JURISDICTION/CONSENT
Bear Stearns admits the jurisdiction of the Office
of Securities, neither admits nor denies the Findings of Fact and Conclusions
of Law contained in this Order, and consents to the entry of this Order by the Securities
Administrator.
II. FINDINGS OF FACT
1. Bear
Stearns, a
2. Bear Stearns is registered
with the Securities and Exchange Commission ("Commission"), is a
member of the New York Stock Exchange, Inc. (“Exchange”) and the NASD Inc.
("NASD") and is licensed to conduct securities business on a
nationwide basis.
3. Bear
Stearns is currently licensed with the Office of Securities as a broker-dealer,
and has been so licensed since at least 1984.
4. This
action concerns the time period of
1. During
the relevant period, the Firm sought and did IB business with many companies
covered by its research. Research
analysts were encouraged to participate in IB activities, and that was a factor
considered in the analysts’ compensation system. In addition, the decision to initiate and
maintain research coverage of certain companies was in some cases coordinated
with the IB Department and influenced by IB interests.
2.
As a result of
the foregoing, certain research analysts at the Firm were subjected to IB
influences and conflicts of interest between supporting the IB business at the
Firm and publishing objective research.
3.
The Firm had
knowledge of these IB influences and conflicts of interest yet failed to
establish and maintain adequate policies, systems and procedures that were
reasonably designed to detect and prevent the influences and manage the
conflicts.
1. Research
analysts were responsible for providing analyses of the financial outlook of
particular companies in the context of the business sectors in which those
companies operated and the securities market as a whole.
2. Research
analysts evaluated companies by, among other things, examining financial
information contained in public filings, questioning company management,
investigating customer and supplier relationships, evaluating companies’
business plans and the products or services offered, building financial models
and analyzing competitive trends.
3. After
synthesizing and analyzing this information, analysts produced research in the
form of full reports and more abbreviated formats that typically contained a
recommendation, a price target, and a summary and analysis of the factors
relied upon by the analyst.
4. The
Firm distributed its analysts' research internally to various departments at
the Firm and externally to the Firm’s retail and institutional investing
clients. In addition, the Firm sold some
of its research directly to non-clients, disseminated it through distribution
agreements with other broker dealers, made it available to third party
subscription services such as First Call, and offered it for sale via market
websites such as MultexInvestor.
5. In
addition to performing research functions, certain research analysts
participated or assisted in IB activities. These IB activities included
identifying companies as prospects for IB services, participating in
"pitches"[1] of IB
services to companies, attending “road shows”[2]
associated with underwriting transactions, and speaking to investors to
generate interest in underwriting transactions.
6. In
preparation for each “pitch” the bankers, with the analyst’s input, prepared a
"pitch book" which was distributed at the meeting and contained a
summary of the Firm’s presentation.
7. The
pitch books, in some instances, identified the covering analyst by name,
provided information about that analyst’s background and reputation, sometimes
characterizing the analyst as the "ax" in his or her coverage sector,
and highlighted the success of Bear Stearns' underwritten IPOs covered by the
analyst. The pitch books also
highlighted such factors as the number of lead and co-managed IPOs that the
Firm currently had under research coverage.
This information was intended to convey to the issuer that such
treatment would be accorded to it if Bear Stearns received the mandate for the
IB transaction.
8. The
analyst’s reputation played a role in pitching the Firm’s IB services to
potential clients. Issuers often chose
an investment bank because of the reputation of the analyst that would cover
the company’s stock.
9. The
pitch to an issuer by the research analyst contributed to Bear Stearns' ability
to win investment banking deals and receive investment banking fees from that
and subsequent investment banking relationships.
12. The
IB activities in which analysts participated also included participating in
commitment committee[3]
and due diligence activities in connection with underwriting transactions and
from time to time assisting the IB Department in providing merger and
acquisition ("M&A") and other advisory services to companies.
13. The
Firm encouraged research analysts to support the IB and other businesses of the
Firm. With regard to IB, research analysts were encouraged to work in
partnership with the IB Department by participating in the foregoing IB
activities, and the level of certain research analysts' participation in these
IB activities was sometimes significant.
a. On
b. In
her 1997/1998 business plan, an analyst stated, “If I were any more aggressive
in the banking area, my office would be on the third floor [location of IB
offices of the Firm].”
14. In
connection with their participation in IB activities, certain research analysts
and investment bankers ("bankers") communicated, in various frequency
and extent, through meetings and via telephone and electronic mail
("e-mail").
15. The
IB department at the Firm was organized into industry groups that corresponded
to certain research sectors. Research
analysts were aware that, in certain circumstances, their positive and
continued coverage of particular companies was an important factor for the
generation of investment banking business.
Thus, some research analysts and investment bankers
coordinated the initiation and maintenance of research coverage, based upon,
among other things, investment banking considerations.
a. On
D. Participation
in Investment Banking Activities was a Factor in Evaluating and Compensating
Research Analysts
1. The
compensation system at the Firm provided an incentive for research analysts to
contribute to all areas of the Firm’s business, including participating in IB
activities and assisting in generating IB business for the Firm. Research analysts' participation in IB
activities was one of several factors considered in determining their
compensation. Notes of staff meetings
reflect the following statements by the Head of Research to analysts:
a. "I’d
like to remind everyone how you get paid at Bear Stearns. It is based on your contribution to your team
and your contribution to the firm . . . Notice that being a partner with
banking is part of the analyst job description.
You are not compared or matrixed or in any way paid on a formula. Working on transactions is not incremental to
your compensation, it is an expected part of it."
b. "I need to remind you that
investment banking revenues are not incremental to your bonus. Being a
partner to banking is part of your job.
You are paid on performance and based on your contribution to the
firm."
2. The
performance of research analysts was evaluated through an annual review
process. Where not set by contract, the
research analyst’s salary and annual bonus were also determined through this
process.
3. Information
on the analyst’s job performance was gathered through annual self-evaluations,
analyst’s business plans, surveys of management, and trading and institutional
sales department personnel, e-mail and oral feedback from employees in the IB
and other departments at the Firm, and the Firm’s institutional clients.
4. The
research analysts' annual business plans contained, among other things, their
contributions to various areas of the Firm, including IB, for the past year,
and their plans for improving their contribution to these areas of the Firm,
including IB, in the coming year.
5. In
their self-evaluations, which were used to communicate their accomplishments to
and petition management for increased compensation analysts discussed such
areas as their rankings in independent research polls, the scope of their
research coverage, their participation in industry conferences, and the Firm's
Autex rankings in stocks they covered.
Certain research analysts provided extensive information regarding their
assistance to IB, including accomplishments, goals, and participation in lead-
and co-managed underwritings, and sometimes also including the revenues to the
Firm associated with the IB transactions on which the analyst worked. In addition, analysts were occasionally
requested to inform research management of fees generated by the IB
transactions on which they worked.
a. In
an
b. In a
6. Certain research analysts perceived that the amount of their
bonus would be influenced by their contribution
to and impact on the firm’s IB business, and the fees generated by IB
transactions on which they worked.
7. Research analysts were encouraged to support and assist all areas of the Firm and to
participate in IB activities and activities that enhanced the reputation of the
Firm's IB business. Based upon
statements by research management indicating that partnership with banking was
part of their job as research analysts, the inclusion of a "Banking"
section in their annual business plans, information regarding IB transactions
in their self-evaluations, and requests from research management for specific
information regarding IB transactions in their coverage sectors, certain
research analysts believed that the revenues generated by their participation
in IB activities was an important factor in their evaluations and compensation. Accordingly, some research analysts were
encouraged to participate in IB activities, increase IB revenues, and enhance
the reputation of the Firm, including its IB business.
8. Research
Analysts’ salaries and bonuses were determined by a multiple factor-based approach. Among other things, analysts were judged for
compensation purposes based on the performance of their stock picks, their
impact on the buy-side accounts as measured by votes, the Firm's market share
in trading volume in the stocks they covered, their participation in IB
activities, and the fees and secondary trading commissions generated from those
activities were considered.
1. In
general, the Firm determined whether to initiate and maintain research coverage
based upon institutional investors' interest in the company, and the company's
importance to the sector or IB considerations, such as attracting companies to
the Firm to generate IB business or maintaining a positive relationship with
existing IB clients.
2. The nature and duration of research
coverage were important criteria for a company’s choice of a broker dealer for
IB services. The pitch books typically contained information stating, among
other things, that: "an important
element to successfully executing an IPO is having an assurance that the Firm
will provide research coverage to the IPO candidate in the offering and in the
aftermarket."
3. The
Firm generally initiated coverage on companies that engaged the Firm in an IB
transaction. In pitching for IB
business, the Firm sometimes represented to the company the frequency with
which reports would be issued.
4. The
Firm’s ratings system, which was intended to reflect the long-term prospects of
a rated stock, allowed research analysts to assign one of five ratings to a
stock: (1) "Buy" - Expected to
outperform the local market by 20% in the next 12 months. Strong conviction and typically accompanied
by an identifiable catalyst; (2) "Attractive" - Expected to
outperform the local market by 10% or more, it is usually more difficult to
identify the catalyst; (3) "Neutral" - Expected to perform in line
with the local market; (4) "Unattractive" - Expected to underperform
the local market; and (5) "Sell" - Avoid the stock.
5. During
the relevant period, there was a sharp downturn in the stock market and stocks
in certain sectors performed poorly.
During this period, the Firm did not issue ratings of
"Unattractive" or "Sell" in connection with any covered
companies in these sectors.
6. Research
management communicated with IB management to ensure that research
opportunities were appropriately aligned with identified IB opportunities.
7. The Stock Selection Committee was
ultimately responsible for making the determination to initiate coverage of a
given company. The Head of Research was
ultimately responsible for making the determination to maintain research
coverage. Nonetheless, IB considerations
sometimes influenced the decision to initiate and maintain coverage.
8. Some research analysts and bankers
actively coordinated the initiation and maintenance of research coverage based
upon, among other things, IB considerations.
This coordination consisted of meetings and communications by telephone
and e-mail.
9. In some circumstances, research
coverage was initiated based on IB considerations.
a. In an April 19, 2000 e-mail from a
member of his staff, the head of the IB Technology Group communicated the
following to the Heads of Research and IB as well as numerous analysts and
bankers: “[Analyst A] and [Analyst B]
agree that [Analyst B] will be the analyst covering CacheFlo [Cacheflow]. [Banker] and [Analyst B] will discuss with
CacheFlo what the planned timing of their offering will be so as to insure that
if we initiate coverage in advance of the transaction we will not be prohibited
from being an underwriter. [Analyst B]
and [Banker] will also stress to the company that if we initiate coverage we
expect our position in the company’s future financing and strategy actions to
be materially improved."
10. Given that research analysts participated
in determining in which IB transactions in their sectors the Firm would
participate, if the Firm determined to participate in an equity offering for a
company, it was expected the company would qualify for an initial
"Buy" rating.
11. An analyst who anticipated initiating
coverage of such a company with less than a "Buy" rating informed IB
in advance as follows.
a.
In a
b. In a
c. In his annual evaluation, this analyst
was criticized as follows: "Has
been working poorly w/bankers - in changing opinions after the firm has committed
to co. mgmts". The analyst
testified that he believed the statement related to his communicating his
opinions regarding companies to bankers in a timely manner, and that if his
opinion regarding a company changed from a more positive opinion to a more negative
opinion about a company after a banker had already made some sort of commitment
to a company, it made life difficult for the banker and was not ideal from his
standpoint. He went on to testify that,
particularly in his highly volatile sector, companies often changed a lot
between the time of the first organizational meeting and the date of the IPO.
12. In some circumstances, the determination
to maintain research was influenced by IB considerations.
a. Due to IB influences a supervisory
analyst perceived and communicated to others that IB approval was required
before coverage could be dropped. In
response to an inquiry by an associate analyst regarding dropping coverage of 2
companies, a supervisory analyst stated in an
b. In an
F. Research Analysts Were Visible on
Stocks to Generate Investment Banking Business
1. Issuers also considered investment
banks' aftermarket trading support as a factor in selecting an investment bank.
The Firm’s trading volume and trading rank were factors it promoted to IB
clients in pitch presentations.
2. The
Firm distributed to sales and trading personnel and research analysts the
"Trading Focus List," which contained stocks of companies from which
the Firm was seeking or with which the Firm had IB business.
3. A
research analyst actively marketed companies on the Trading Focus List in order
to obtain IB business.
a. In
a
b. In
a September 14, 2000 e-mail to Equity Trading the same analyst wrote the
following regarding banking client SonicWall ("SNWL"): "We need
help in boosting our trading stat for SNWL. Both management and their VC called
me yesterday complaining about our trading - #2 in August and #3 so far in
September. More importantly, they argued that we are not supporting the stock
when it is weak...I made a positive call on Monday but am not getting much
support. Pls help us here since this important technology client indicated to
me that if we do not improve, it will hurt our banking relationship with the
company."
c. In
a March 8, 2001 e-mail the same analyst again wrote to Equity Trading regarding
two IB clients he covered: "Subject: MUSE [Micromuse] and ISSX [Internet
Security Systems] autex - both on focus list. On MUSE - we dropped from #3 or 4
in 2000 to #10 in Feb and March to date. I just called the trader to see what
we can do. I have been extremely active on the name- took management to
4.
In order to raise
or maintain the Firm’s visibility on stocks with which the Firm wanted to do IB
business, certain research analysts nominated companies to participate at Firm
sponsored conferences, took company managements on non-deal road shows, hosted
field trips for institutional investors to companies' headquarters and arranged
other meetings between institutional investor clients and companies.
5.
Research analysts
were visible on stocks of companies with which the Firm wanted to do IB
business in order to generate IB business.
G. Research
Analysts Were Subject to Pressure by Covered Companies
1. Certain
research analysts communicated regularly with employees of the companies that
they covered, including executive and senior management of those
companies. These communications occurred
through telephone and e-mail exchanges, company-sponsored events, and analyst
calls.
2. Research
analysts were sometimes subject to pressure from companies they covered to
issue better ratings and recommendations.
Research analysts understood that negative ratings and recommendations
could adversely affect the Firm’s ability to attract and retain IB business
from those companies.
a. On
November 2, 2000, in his 2000 self-evaluation an analyst wrote in a section
entitled "Areas to Improve: We want our banking clients to know that our
research is objective and independent but always sensitive to their best
interests. There have been instances in
my career where certain banking clients felt that our research and public
comments weren’t sensitive to their interests.
This is a very important issue for us and we take it most seriously. We will continue to make every effort to be
sensitive to our clients and our banking partners."
3. When
research analysts downgraded or issued a negative comment on a banking client,
they sometimes received direct feedback from high-ranking company officials.
a. In
an
H. In Certain Instances, the Firm Published
Exaggerated or Unwarranted Research
1. On
several occasions, the conflicts of interest discussed above resulted in
analysts publishing recommendations and/or ratings that were exaggerated or
unwarranted, and/or contained opinions for which there was no reasonable basis. The following are examples of how these
conflicts affected the research.
a. Bear
Stearns lead managed the IPO and secondary offerings for SonicWall in November
1999 and March 2000 respectively. An
analyst rated the stock a "Buy" from the IPO until April 2002. In
b. Bear
Stearns initiated coverage of MUSE with an "Attractive" rating in
September 1999, raised the rating to a "Buy" in January 2000 and
maintained a "Buy" rating on the stock until July 2002. While listening to a MUSE analyst call on
c. Bear
Stearns lead managed the IPO for CAIS Internet, Inc. in May 1999. The analyst rated the stock a "Buy"
from the IPO through his last report on the company in November 2000. On
d. Bear Stearns co-managed the IPO and
secondary offerings for
1. In
August 2000, as part of an offering that took place in May 2000, the Firm made
a payment of $102,750 to another broker-dealer in connection with research coverage
it provided for Andrx Corp. ("ADRX"), a Bear Stearns' investment
banking client in connection with an underwriting transaction for which Bear
Stearns was a lead manager.
2. Bear
Stearns did not take steps to ensure that this broker-dealer disclosed in its
research that it had been paid to issue research on ADRX. Further Bear Stearns did not disclose or
cause to be disclosed the details of this payment.
1.
While the role of
the research analysts was to produce objective research, the Firm also
encouraged them to participate in IB activities. As a result of the foregoing, research
analysts were subject to IB influences and conflicts of interest between
supporting the IB business at the Firm and publishing objective research.
2. The Firm had knowledge of these IB
influences and conflicts of interest yet failed to manage them adequately to
protect the objectivity of its published research.
3. Bear Stearns failed to establish and maintain adequate
policies, systems and procedures reasonably designed to ensure the objectivity
of its published research. Although Bear
Stearns had some policies governing research analyst activities during the relevant
period, these policies were inadequate and did not address the conflicts of
interest that existed.
III.
CONCLUSIONS OF LAW
1.
The Office of Securities has jurisdiction over this matter pursuant to the
Revised Maine Securities Act, 32 M.R.S.A. §§ 10101-10713.
2.
The Securities
Administrator finds the following relief appropriate and in the public
interest.
3.
32 M.R.S.A. §
10313(1) states that the Securities Administrator may by order deny, suspend,
or revoke any license if she finds that the order is in the public interest and
that the applicant or licensee or, in the case of a broker-dealer or investment
adviser, any partner, executive officer, or director, any person occupying a
similar status or performing similar functions, or any person directly or indirectly
controlling the broker-dealer or investment adviser: (G) has engaged in any unlawful, unethical or
dishonest conduct or practice in the securities business; or (J) has failed
reasonably to supervise sales representatives if a broker-dealer, or employees
if an investment adviser.
a.
Bear Stearns failed to ensure that analysts who issued research were
adequately insulated from pressures and influences from covered companies and
investment banking. This conduct was a dishonest and unethical practice under 32
M.R.S.A. § 10313(1)(G).
b.
Bear Stearns failed to reasonably supervise its employees to ensure
that its analysts who issued research were adequately insulated from pressures
and influences from covered companies and investment banking as required by 32
M.R.S.A. § 10313(1)(J).
IV. ORDER
On the basis of the Findings of
Fact, Conclusions of Law, and Bear Stearns’ consent to the entry of this Order,
for the sole purpose of settling this matter, prior to a hearing and without
admitting or denying any of the Findings of Fact or Conclusions of Law.
IT IS HEREBY ORDERED:
1.
This Order concludes the investigation by the Office
of Securities and any other action that the Office of Securities could commence
under the Revised Maine Securities Act on behalf of the Securities
Administrator as it relates to Bear Stearns, relating to certain research or
banking practices at Bear Stearns.
2.
Bear Stearns will CEASE AND DESIST from violating sections 10313(1)(G)
and 10313(1)(J) of the Revised Maine Securities Act in connection with the
research practices referenced in this Order and will comply with the
undertakings of Addendum A, incorporated herein by reference.
3.
If payment is not
made by Bear Stearns or if Bear Stearns defaults in any of its obligations set
forth in this Order, the Office of Securities may vacate this Order, at its
sole discretion, upon 10 days notice to Bear Stearns and without opportunity
for administrative hearing.
4.
This Order is not
intended by the Office of Securities to subject any Covered Person to any
disqualifications under the laws of any state, the District of Columbia or
Puerto Rico (collectively, “State”), including, without limitation, any
disqualifications from relying upon the State registration exemptions or State
safe harbor provisions. "Covered
Person" means Bear Stearns, or any of its officers, directors, affiliates,
current or former employees, or other persons that would otherwise be
disqualified as a result of the Orders (as defined below).
5.
The SEC Final
Judgment, the NYSE Stipulation and Consent, the NASD Letter of Acceptance,
Waiver and Consent, this Order and the order of any other State in related
proceedings against Bear Stearns (collectively, the “Orders”) shall not
disqualify any Covered Person from any business that they otherwise are
qualified, licensed or permitted to perform under applicable law of the State
of Maine and any disqualifications from relying upon this state’s registration
exemptions or safe harbor provisions that arise from the Orders are hereby
waived.
6.
For any person or entity not a party to this Order, this Order does not
limit or create any private rights or remedies against Bear Stearns including,
without limitation, the use of any e-mails or other documents of Bear Stearns
or of others regarding research practices or limit or create liability of Bear
Stearns or limit or create defenses of Bear Stearns to any claims.
7.
Nothing herein shall preclude the State of Maine, its departments,
agencies, boards, commissions, authorities, political subdivisions and corporations,
other than the Office of Securities and only to the extent set forth in
paragraph 1 above (collectively, “State Entities”) and the officers, agents or
employees of State Entities from asserting any claims, causes of action, or
applications for compensatory, nominal and/or punitive damages, administrative,
civil, criminal, or injunctive relief against Bear Stearns in connection with
certain research and/or banking practices at Bear Stearns.
V. MONETARY SANCTIONS
IT IS
FURTHER ORDERED, ADJUDGED AND DECREED that:
As a
result of the Findings of Fact and Conclusions of Law contained in this Order,
Bear Stearns shall pay a total amount of $80,000,000.00. This total amount shall be paid as specified
in the SEC Final Judgment as follows:
$25,000,000
to the states (50 states, plus the
$25,000,000
as disgorgement of commissions, fees and other monies as specified in the SEC
Final Judgment;
$25,000,000,
to be used for the procurement of independent research, as described in the SEC
Final Judgment;
$5,000,000, to be used for investor education, as described in Addendum A, incorporated by reference herein.
Bear Stearns agrees that it shall not seek
or accept, directly or indirectly, reimbursement or indemnification, including,
but not limited to payment made pursuant to any insurance policy, with regard
to all penalty amounts that Bear Stearns shall pay pursuant to this Order or
Section II of the SEC Final Judgment, regardless of whether such penalty
amounts or any part thereof are added to the Distribution Fund Account referred
to in the SEC Final Judgment or otherwise used for the benefit of
investors. Bear Stearns further agrees
that it shall not claim, assert, or apply for a tax deduction or tax credit
with regard to any state, federal or local tax for any penalty amounts that
Bear Stearns shall pay pursuant to this Order or Section II of the SEC Final
Judgment, regardless of whether such penalty amounts or any part thereof are
added to the Distribution Fund Account referred to in the SEC Final Judgment or
otherwise used for the benefit of investors.
Bear Stearns understands and acknowledges that these provisions are not
intended to imply that the State of Maine Office of Securities would agree that
any other amounts Bear Stearns shall pay pursuant to the SEC Final Judgment may
be reimbursed or indemnified (whether pursuant to an insurance policy or
otherwise) under applicable law or may be the basis for any tax deduction or
tax credit with regard to any state, federal or local tax.
VI. GENERAL PROVISIONS
This order and any dispute related thereto shall be
construed and enforced in accordance, and governed by, the laws of the State of
The parties represent, warrant and agree that they
have received independent legal advice from their attorneys with respect to the
advisability of executing this Order.
Dated this 28th day of August, 2003.
By: s/Christine
A. Bruenn
Christine
A. Bruenn, Securities Administrator
State
of
CONSENT TO
ENTRY OF ADMINISTRATIVE
ORDER BY
BEAR, STEARNS & CO. INC.
1.
Bear Stearns hereby acknowledges that it has been
served with a copy of this Order, has read the foregoing Order, is aware of its
right to a hearing and appeal in this matter, and has waived the same.
2.
Bear Stearns admits the jurisdiction of the Office
of Securities, neither admits nor denies the Findings
of Fact and Conclusions of Law contained in this Order, and consents to entry
of this Order by the Securities Administrator as settlement of the issues
contained in this Order.
3.
Bear Stearns states that no promise of any kind
or nature whatsoever was made to it to induce it to enter into this Order and
that it has entered into this Order voluntarily.
4.
Bear Stearns understands that the State of
Mark E. Lehman represents that he is General
Counsel of Bear Stearns and that, as such, has been authorized by Bear
Stearns to enter into this Order for and on behalf of Bear Stearns.
Dated
this 21st day of August, 2003.
Bear,
Stearns & Co. Inc.
By: s/Mark E.
Lehman
Title: Senior
Managing Director and General Counsel
SUBSCRIBED AND SWORN TO before me this _____ day of
__________________, 2003.
__________________________________________
Notary Public
My Commission expires:___________________
[1] A "pitch" is a presentation made by bankers and research analysts to a potential IB client in order to obtain the mandate for an upcoming IB transaction. In competing for an IB mandate, the Firm typically sent bankers and the analyst to meet with company management to persuade the company to select the Firm as one of the investment bankers in a contemplated transaction. At these "pitch" meetings Firm bankers would present their level of expertise in the company’s sector and discuss their previous experience with other such companies, as well as their view of the company’s merits and likelihood of success.
[2] A "road show" is a series of presentations made to potential investors in conjunction with the marketing of an upcoming underwriting.
[3] The "commitment committee" was responsible for, among other things, evaluating and determining the Firm's participation in IPOs and other IB transactions.
[4] In fact, Bear Stearns had not yet initiated coverage on IPET at the time this e-mail was sent.