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Analyst Settlement Payout Is Clarified

Funds are expected to go first to individuals who lost money on firms named in complaints.

June 17, 2003|From Reuters

WASHINGTON — Stockholders who lost money on companies specifically cited in related Securities and Exchange Commission complaints are likely to be first in line for payments from a $1.4-billion legal settlement over tainted Wall Street stock research, a court filing released Monday said.

That may leave out many other investors who believe they were wronged by brokerage practices during the bull market, experts said.

The settlement, finalized April 28, has been criticized by some for trying to reimburse investors in a scandal so vast that it is difficult to say who was hurt and by how much.

U.S. District Judge William Pauley in New York, who is required to approve the settlement, expressed reservations two weeks ago about some aspects of the deal and asked the SEC for clarification.

Answering the judge, the SEC said individuals who lost money in shares of companies specifically cited in the agency's settlement probably would go to the front of the payout line.

The stock purchases must have been made through one of the 10 brokerages involved during limited time periods that range from as early as July 1998 to as late as December 2001.

The agency said the payout formula would be set initially by an administrator, still unnamed, who would manage several funds to be set up to handle the money.

The commission also said it believed the settlement money could be paid to investors based on records the brokerages already have -- without asking investors to provide much more information.

"Quickness and ease of administration are important considerations," the SEC said.

The agency told the judge that mutual fund shareholders wouldn't be able to get direct reimbursements for investment losses, but said they may be able to get money back indirectly through their funds.

Also, purchasers of options and other derivatives in companies mentioned in SEC court complaints may take a back seat to holders of actual stock in the companies cited, the commission said.

Under the SEC's schedule, anyone chosen to get money from the settlement probably won't see a check for at least 17 months.

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