Deal or No Deal?
When stockbrokers are accused of missteps or misconduct, more than 90% of them settle with the Financial Industry Regulatory Authority (FINRA), the private oversight group. But does it pay to make a deal rather than go before FINRA's three-judge panel? Not necessarily, concludes a study by law firm Sutherland Asbill & Brennan. It found that in 11% of litigated cases, FINRA dismissed the charges outright. Even when FINRA upheld the charges, about half of the time it reduced the initial fines and suspensions. For 46% of brokers facing lifetime bans, litigation yielded an average 16.5-month suspension instead. (Lest anyone think FINRA is a pushover: It raised fines in about a third of litigated cases and won the nine fraud cases it brought in the past year.) The bottom line, says Sutherland partner Brian Rubin: Brokers should consider litigation. FINRA disagrees. A "tiny fraction" of last year's 1,200 actions were litigated, a spokesman says, a fact that "speaks volumes about...our disciplinary measures."
Losing Green by Going Green
When Deere (DE) announced plans last year to participate in a government program to cut greenhouse gas emissions, investors didn't applaud the move: The tractor maker's share price dropped 4% within two days.
New research concludes that's a typical reaction. Dartmouth College professors Karen Fisher-Vanden and Karin Thorburn looked at companies in the Environmental Protection Agency's voluntary Climate Leaders initiative, which requires members to commit to reducing or offsetting emissions over the next 5 to 10 years. In the two days after joining it, the average company dropped 0.9% more than it would have from normal market factors. Companies in carbon-heavy industries such as utilities, though, don't take as much of a hit. In those cases, the professors suspect that investors view participation as a preemptive move against all but certain regulation.