(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.)

Commission Discusses Distribution Funds for IPO Global Settlement

The SEC provided preliminary information regarding the distribution funds that will be established as a result of the global settlement reached recently with brokerage firms and investment banks concerning analyst conflicts. These funds are the repositories for the payments to be made by the investment firms settling the cases brought by the SEC. According to the SEC, "these funds are intended to provide for the equitable, cost-effective distribution of funds to those who are determined to be eligible to receive them." The settlements are intended "to ensure that there will be an equitable--but not necessarily equal--distribution of funds and that those who are allocated funds receive meaningful payments," added the Commission.

The settlement provides that the Commission will recommend to the U.S. District Court for the Southern District of New York for its consideration and approval a distribution fund administrator. This individual will prepare distribution plans that contain the complete and final terms for distribution of funds to investors.

The fund administrator may consider the nature of the firm's conduct with respect to the stocks in question, whether the investor was a retail or institutional customer, and how soon the investor bought stock in the company after the publication of the research in question regarding that company in making the distribution allocations. According to the SEC, the purchase must have been made after the publication or receipt of such research and, in general, the shorter the time period, the greater the likelihood that the administrator would conclude that the investor suffered a loss as a result of conduct alleged in the SEC complaint.

The SEC advised that investors need not take any action at this time to be eligible to receive money from the distribution funds. Under the terms of the settlement, the firms must provide the fund administrator with all documents and information necessary to enable the administrator to identify those who may be eligible to receive a payment. The Commission also noted that the settlement expressly provides that investors who are eligible to receive payments from the distribution funds are not precluded from pursuing, to the extent otherwise available, any other remedy or recourse they may have.