1. Identify and explain the conflicts of interest referred to in this case.
2. What additional rules should the SEC make?
3. What should be included in the investor education that the settlement funds are earmarked for?
4. Was it appropriate for the New York Attorney General’s Office to have become involved in securities regulation, or should this have been left to securities regulators?
On December 20, 2002, New York’s Attorney General, Eliot Spitzer, announced a $1.4 billion settlement ending a multi-regulator probe of ten brokerages that alleged that “investors were duped into buying over-hyped stocks during the 90s bull market.”1 But the settlement may represent only the tip of the iceberg as aggrieved investors review the findings and sue the brokerages for redress of their personal losses estimated to be $7 trillion since 2000.2 Nonetheless, it promises an overdue start on the reform of Wall Street’s3 flawed conflict of interest practices. As such, the revisions ultimately adopted will provide a template for investment advisors around the world.