NEW YORK, Nov. 9 -- Securities and Exchange Commission enforcement chief Stephen Cutler said last week's resignation of SEC Chairman Harvey L. Pitt would not hinder talks with 12 securities firms aimed at settling conflict-of-interest probes.
"We're committed to making sure the process continues to work," Cutler said after a panel discussion at the Practicing Law Institute conference's session on securities regulation.
Cutler and New York Attorney General Eliot Spitzer have led talks in recent weeks with Citigroup Inc., Credit Suisse First Boston and 10 other securities firms aimed at resolving investigations into whether the firms published overly optimistic research reports on companies to win their investment banking business.
SEC commissioners, including Pitt if a successor has not been named, must vote on any settlement agreement reached by Cutler's enforcement division.
Regulators proposed three weeks ago that the firms resolve the conflict-of-interest probes by paying as much as $1 billion to establish an oversight board, run by regulators. The board would select independent research that the firms would have to offer to retail customers to supplement their own analysis. Some Wall Street executives have found the proposal flawed, in part because it amounts to subsidizing research for which there isn't a big market.
Lawyers on a panel with Cutler raised the question of whether states should have a role in reforming a national industry. "Spitzer made it clear that his main goal was not to seek redress for individuals in the state but to change the securities industry rules," said Carey Dunne, a lawyer at Davis, Polk & Wardwell.
Cutler, who has been working with Spitzer in the talks, defended the state attorney general. "I think Mr. Spitzer's office did important work in bringing to light conduct that was incredibly important for the world to know," Cutler said. Earlier this year, Spitzer released e-mails from Citigroup and Merrill Lynch & Co. analysts showing some of their analysts privately disparaged stocks they publicly encouraged investors to buy.
A recurring complaint among the securities defense lawyers on the panel was that state attorneys general and some district attorneys were jumping into enforcement for publicity.
"Once all these other state attorney generals see Eliot Spitzer on the 'Today' show and the cover of Fortune magazine, they're all saying 'How do I get on there?' " said Ted Wells, co-chairman of the litigation department at Paul Weiss Rifkind Wharton & Garrison. "They're not going away."
In the conflict-of-interest case, federal and state regulators made simultaneous demands for years' worth of e-mails and documents. Some witnesses were summoned before state regulators and federal regulators for separate testimony on the same material in one week, said Bruce Hiler, a partner at O'Melveny & Myers.
"The government has run amok a bit," said Mary Jo White, a former U.S. attorney in New York and now a partner at Debevoise & Plimpton. "The government generally is not distinguishing between the good, the bad and the ugly. There's a broad brush and feeding frenzy."