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American Morning

Minding Your Business: Big Settlement, Big Deal?

Aired December 20, 2002 - 07:46   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


BILL HEMMER, CNN ANCHOR: We want to talk about this billion- dollar settlement that broke early this morning, and what's in it for you today.
First though, Andy is watching the markets today.

(CROSSTALK)

ANDY SERWER, "FORTUNE" MAGAZINE: Yes. I just want to check in with what happened yesterday, a sell-off on Wall Street yesterday, Bill. The Dow was down 82 points, Nasdaq followed suit, so did the S&P 500.

What happened?

HEMMER: Yes, tell us.

SERWER: More war jitters...

HEMMER: Yes.

SERWER: ... talk of Iraq, the rhetoric heating up; also problems in Venezuela dogging the market as well.

The big news this morning though is this settlement. We understand there will be a press conference at 1:00 today at the New York Stock Exchange led by Eliot "the enforcer" Spitzer, the New York State attorney general; also people from the Securities and Exchange Commission, the NYSC, also other regulators as well.

A $1.5 billion settlement. Let's break it down for you right now. The brokerages will pay $1 billion in fines.

Now, there are some problems here, some people are saying, because they're not going to admit any guilt, which is troubling to some people.

HEMMER: It's like a plea bargain then, right?

SERWER: Yes, exactly basically. Analysts and bankers will split. We talked about that. Independent research separated from the investment bankers, and the executives won't get any IPO kickbacks. Of course, that doesn't really matter these days...

HEMMER: Yes.

SERWER: ... because IPOs are kind of... HEMMER: Isn't that the truth.

SERWER: ... really sucking wind, aren't they?

HEMMER: Is there a possibility that an investor could get cash back on this one...

(CROSSTALK)

SERWER: Yes, yes.

HEMMER: Really?

SERWER: This is what's really intriguing here. Let me talk to you about this a little bit.

HEMMER: Sure.

SERWER: The $1 billion, here's what happens: $500 million of that goes to the Securities and Exchange Commission. They're going to be setting up a restitution fund. The states get -- that restitution fund is where investors can actually get money, but it's going to be a really difficult task assessing which investors get money...

HEMMER: Right.

SERWER: ... how much, did you have tech stocks, did you have bad advice from an analyst. The states will get the other $500 million. They're supposed to distribute that money, but they're saying it's going to be too complicated to do that. So, they're going to be putting it into investor education and it will go directly to the states' treasuries.

So, yes, Bill, investors will get money, but figuring that out is going to be very, very difficult. If you're planning on getting rich on this thing, forget it.

HEMMER: Quickly in 10 seconds, do you know of a case where investors have gotten money back...

(CROSSTALK)

SERWER: Yes, there have been class-action settlements and big fines on Wall Street where investors have recouped money, but Eliot Spitzer was criticized when he fined Merrill Lynch that $100 million. It went directly to the New York State Treasury. Investors didn't get a dime.

HEMMER: Wow! OK, thank you, Andy. Watch that, $1 billion, a lot of money.

SERWER: Yes, a lot of money.

HEMMER: Thank you, Andy.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.







Aired December 20, 2002 - 07:46   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: We want to talk about this billion- dollar settlement that broke early this morning, and what's in it for you today.
First though, Andy is watching the markets today.

(CROSSTALK)

ANDY SERWER, "FORTUNE" MAGAZINE: Yes. I just want to check in with what happened yesterday, a sell-off on Wall Street yesterday, Bill. The Dow was down 82 points, Nasdaq followed suit, so did the S&P 500.

What happened?

HEMMER: Yes, tell us.

SERWER: More war jitters...

HEMMER: Yes.

SERWER: ... talk of Iraq, the rhetoric heating up; also problems in Venezuela dogging the market as well.

The big news this morning though is this settlement. We understand there will be a press conference at 1:00 today at the New York Stock Exchange led by Eliot "the enforcer" Spitzer, the New York State attorney general; also people from the Securities and Exchange Commission, the NYSC, also other regulators as well.

A $1.5 billion settlement. Let's break it down for you right now. The brokerages will pay $1 billion in fines.

Now, there are some problems here, some people are saying, because they're not going to admit any guilt, which is troubling to some people.

HEMMER: It's like a plea bargain then, right?

SERWER: Yes, exactly basically. Analysts and bankers will split. We talked about that. Independent research separated from the investment bankers, and the executives won't get any IPO kickbacks. Of course, that doesn't really matter these days...

HEMMER: Yes.

SERWER: ... because IPOs are kind of... HEMMER: Isn't that the truth.

SERWER: ... really sucking wind, aren't they?

HEMMER: Is there a possibility that an investor could get cash back on this one...

(CROSSTALK)

SERWER: Yes, yes.

HEMMER: Really?

SERWER: This is what's really intriguing here. Let me talk to you about this a little bit.

HEMMER: Sure.

SERWER: The $1 billion, here's what happens: $500 million of that goes to the Securities and Exchange Commission. They're going to be setting up a restitution fund. The states get -- that restitution fund is where investors can actually get money, but it's going to be a really difficult task assessing which investors get money...

HEMMER: Right.

SERWER: ... how much, did you have tech stocks, did you have bad advice from an analyst. The states will get the other $500 million. They're supposed to distribute that money, but they're saying it's going to be too complicated to do that. So, they're going to be putting it into investor education and it will go directly to the states' treasuries.

So, yes, Bill, investors will get money, but figuring that out is going to be very, very difficult. If you're planning on getting rich on this thing, forget it.

HEMMER: Quickly in 10 seconds, do you know of a case where investors have gotten money back...

(CROSSTALK)

SERWER: Yes, there have been class-action settlements and big fines on Wall Street where investors have recouped money, but Eliot Spitzer was criticized when he fined Merrill Lynch that $100 million. It went directly to the New York State Treasury. Investors didn't get a dime.

HEMMER: Wow! OK, thank you, Andy. Watch that, $1 billion, a lot of money.

SERWER: Yes, a lot of money.

HEMMER: Thank you, Andy.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.