Seven U.S. brokerage firms are coughing up a total of US$3.65 million in penalties after settling with the Securities and Exchange Commission for failing to disclose they received payments for providing research coverage of certain public companies.

The seven firms are: Needham & Company Inc., Janney Montgomery Scott LLC, Prudential Equity Group LLC, Adams Harkness Inc., Friedman, Billings, Ramsey & Co. Inc., and SG Cowen & Co. LLC.

The commission found that from 1999 through 2002, these firms received payments for research from other broker-dealers that were underwriting securities offerings for certain public, or soon-to-be public, companies. The underwriting broker-dealers paid the firms to issue research or “cover” their issuer clients. None of the firms disclosed in their published research reports the receipt and amount of the payments.

Without admitting or denying the findings, the seven firms have consented to orders that they cease and desist from committing any violations and any future violations. In addition, the SEC fined four of the firms for violating the record-keeping requirements. Each of the four — Adams Harkness, Janney, Morgan Keegan, and Needham — consented, without admitting or denying the findings, to a cease-and-desist order. The firms also have consented to undertakings to ensure that they are in compliance with the record-keeping requirements.

The biggest penalties will be paid by Janney and Morgan Keegan, both will pay US$875,000, Needham is on the hook for US$700,000, Adams Harkness pays US$575,000, Prudential Equity pays US$375,000, Friedman Billings and SG Cowen are both fined US$125,000.