New York State Attorney General Eliot Spitzer faced a decision about how committed misconduct by big Wall Street firms during the Internet boom to stop. The equity analysts at Merrill Lynch and other Wall Street firms were objectively advises private investors whether to buy or sell publicly traded shares calculated. The analysts had rated a strong buy some shares, while at the same time disparaging it in Internet e-mail as “a piece of junk” or a “powder keg”. Spitzer concluded that the anal … Read more »

New York State Attorney General Eliot Spitzer faced a decision about how committed misconduct by big Wall Street firms during the Internet boom to stop. The equity analysts at Merrill Lynch and other Wall Street firms were objectively advises private investors whether to buy or sell publicly traded shares calculated. The analysts had rated a strong buy some shares, while at the same time disparaging it in Internet e-mail as “a piece of junk” or a “powder keg”. Spitzer concluded that the analysts sometimes issued as reviews buy stock of companies because of a conflict of interest: The Wall Street firms worked the analysts made handsome fees for underwriting the company share issues and providing other services. The usual procedure when a law enforcement agency such as the Federal Securities and Exchange Commission (SEC), such a situation would be discovered to complete their investigation and to negotiate a resolution with the private financial companies. If it could not resolve the matter, the Agency would formally lodge a complaint against the company in court. This option was open to Spitzer, but the 1921 New York statue gave him an alternative. Even before bringing an action in court – and while they continue to investigate the company further – he could transfer his knowledge to warn the public and the company brand with misconduct. This case examines the decision Spitzer made, and its long-term consequences for the U.S. regulation of financial markets and financial sector.
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from
Rawi Abdelal,
Rafael Di Tella,
Jonathan Schlefer
Source: Harvard Business School
26 pages.
Release Date: 04 March, 2008. Prod #: 708019-PDF-ENG
Eliot Spitzer: Pushing Wall Street Reform solution to case HBR