State securities regulators announced a US$25 million settlement with Wachovia Capital Markets LLC over alleged conflicts of interest between research and investment banking.

The settlement effectively resolves a 28-month multi-state investigation. The firm neither admitted nor denied the allegations as part of the settlement. The multi-state settlement is related to the April 2003 Global Settlement that 12 other investment banks have reached with the state, federal and industry regulators.

Under the terms of this settlement, Wachovia Capital Markets will pay a total of US$25 million, including: US$20 million in penalties for failing to supervise its employees in connection with potential conflicts of interest between equity research and investment banking; US$1.65 million in penalties for failing to preserve required books and records; US$3 million to be used for investor education, as designated by the Board of Directors of the North American Securities Administrators Association; and US$350,000 for costs associated with the investigation, which will be paid to NASAA.

“The settlement announced today by state securities regulators is a positive step in our ongoing efforts to strengthen investor confidence and foster fairness in our capital markets,” said NASAA president and Wisconsin Securities Administrator, Patricia Struck, in a statement. “A multi-state team of investigators worked long and hard on this investigation, uncovering yet another example of the potential conflicts of interest between research analysts and investment banking that has undermined investor confidence.

“Today’s multi-state agreement is a reflection of the ongoing efforts by state securities regulators to help restore investor confidence in our financial markets by ensuring that they are treated fairly and provided with objective research. It also should serve as an important reminder to the securities industry of the significance regulators place on the proper supervision of employees,” she added.