(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

Investor Education Plan in Global Settlement Approved

A federal district judge has approved the investor education plan proposed by the SEC in connection with the $1.4 billion global settlement with 10 major investment firms. According to the Commission, "the plan is an unprecedented initiative to fund investor education programs nationwide." U.S. District Judge William H. Pauley III (SD NY) approved the plan, which calls for the creation and funding of a non-profit organization with $52.5 million over five years from funds contributed by seven of the firms that participated in the global settlement. The firms settled complaints with the SEC, the NASD and the New York Stock Exchange alleging undue influence of investment banking interests on securities research.

"The organization is designed to equip Americans with the knowledge and skills necessary to make informed investment decisions," stated the SEC. Judge Pauley's order noted "that the entity will benefit the entire nation at a time when increasing numbers of American households are investing in the equity markets." SEC Chairman William H. Donaldson added that "this new effort will greatly help American families achieve financial security and protect them from financial abuse."

In separate orders, the court appointed Charles D. Ellis as the chairman and George G. Daly as the executive director of the new organization. Mr. Ellis is a senior advisor and a director of Greenwich Associates, an international business strategy firm he founded in 1972. Mr. Daly is a professor of business administration and former dean of the Stern School of Business of New York University.

Chairman Ellis will oversee a board of directors, composed of five to seven members, which will make all decisions as to the recipients of the investor education money. The board members will initially be selected by the chairman, in consultation with the executive director, and will be subject to SEC approval. The board will seek and consider grant proposals for projects such as community-based education, workplace investor education initiatives, academic research into techniques or programs most likely to be successful and programs to educate investors about fraudulent investments.

In a prior ruling in October 2003, the court had ordered that $52.5 million of the settlement funds would be paid over a period of five years into a new investor education entity. The entity was to be organized as a tax-exempt organization and structured so that it can receive additional funds in the future from sources other than the investor education funds paid by the investment bank defendants.

¨ The court order will be published in a forthcoming REPORT