Bear Stearns Used Analyst to Tout IPO after greeing not to!! Can they be ever trusted?

[Dave Farber <dave () farber net>]

Bear Stearns Used Analyst to Tout IPO
Mon May 12,12:29 AM ET
    


Days after agreeing to a sweeping settlement aimed at overhauling the way
Wall Street does business, Bear Stearns Cos. reverted to the practice of
using an analyst to promote a new stock offering, The Wall Street Journal
reported Monday. 


When questions about the episode were raised by The Wall Street Journal,
Bear Stearns took the embarrassing step of delaying the initial public
offering of stock in credit-card-processing firm iPayment Inc. (Nasdaq:IPMT
- News), and the securities firm said it would bar the analyst from covering
iPayment. Bear Stearns also called the Securities and Exchange Commission
(news - web sites) (News - Websites) and the New York Attorney General's
office to tell them about the incident and apologize.


Those two agencies were the principal architects of a deal announced two
weeks ago with 10 big Wall Street firms, including Bear Stearns, in which
they collectively agreed to pay $1.4 billion to regulators and vowed to
revamp their businesses to eliminate conflicts of interest between research
analysts and investment bankers. One key stricture: The firms would prohibit
analysts from touting, at IPO roadshows, the companies that the investment
bankers were being paid to take public. Bear Stearns paid $80 million as
part of the pact, without admitting or denying wrongdoing.


The appearance in a promotional Webcast of the Bear Stearns analyst, senior
managing director James Kissane, is sure to reinforce regulatory concern
that Wall Street firms aren't sufficiently contrite in light of the recent
research disclosures and settlement.


Already, two Wall Street chief executive officers have angered regulators by
appearing to play down in public comments the significance of the regulatory
crackdown. The appearance of the Bear Stearns analyst is the first
indication that employees in the trenches also don't appear to have digested
the seriousness of regulatory concern over such conflicts.


"It's just astonishing to me that a firm could allow an analyst to
participate in a roadshow -- and the fact that the prohibition on such
conduct isn't literally in effect yet doesn't make me any less
disappointed," SEC enforcement chief Stephen Cutler said in a statement. The
settlement's provisions take effect 60 days after the pact is entered into
court files, something that hasn't happened yet, which means that Bear
Stearns technically wasn't in violation of the agreement.


In a statement, Bear Stearns spokeswoman Elizabeth Ventura said: "We fully
support both the letter and more importantly the spirit of the recent
settlement agreement. We deeply regret that this unfortunate incident
occurred. Once the problem was identified, we took immediate action to
rectify the situation and are taking precautions to ensure that it will not
occur again." 


Mr. Kissane didn't reply to requests for comment.


On Friday, Bear Stearns failed to price the iPayment deal as expected and
told investors that it was waiting for clearance from the SEC. IPayment had
been trying to sell 4.5 million shares at $14 to $16 a share. IPayment
executives didn't respond yesterday to messages seeking comment.


-- Ann Davis, staff reporter of The Wall Street Journal, contributed to this
article. 

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