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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, November 28, 2007

FINRA Fines Wachovia for Research Report Violations

FINRA announced today that it censured and fined Wachovia Capital Markets, LLC $300,000 for violations of FINRA's research analyst conflict of interest disclosure rules that were adopted after the conflicted analysts scandal.  FINRA found that from June 2004 to May 2006, Wachovia failed to include in 40 research reports a total of 56 disclosures concerning Wachovia's financial relationships with subject companies. In 20 of those reports, Wachovia failed to disclose that it managed or co-managed a public offering of securities issued by the subject company.  In other research reports, Wachovia failed to disclose that it received compensation from the subject company for investment banking services, that it owned an interest in the common stock of the company or that it was making a market in the securities of the company.

Additionally, FINRA found that from March 2004 to July 2007, in over 15,000 research reports, Wachovia included a disclaimer stating that the firm and its affiliates "may" own an interest in the securities of the subject company. This disclaimer is inconsistent with FINRA's requirement that firms affirmatively disclose whether they own one percent or more of the common equity stock of the subject company.

In settling this matter, Wachovia neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

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