Kidder, Peabody Case Impels a Closer Look at Securities Industry WALL STREET ETHICS

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THE multibillion-dollar securities industry is finding itself in its least favorite setting: in the glare of media attention. This is thanks to increasing concerns about ethical standards within the industry, as well as more tepid growth in both corporate earnings and the United States national economy.

Last week, General Electric Company removed the top management of its investment-house subsidiary, Kidder, Peabody & Co., bringing in a new team of GE officials. Kidder's chief executive officer, Michael Carpenter, is out. GE's chief financial officer, Dennis Dammerman, is in. Mr. Dammerman will run Kidder in the summer and through part of the fall; Denis Nayden, also a top GE official, will take over the investment house later in the fall.

The changes at Kidder come after the firm's top government bond trader, Joseph Jett, was fired. Mr. Jett allegedly conducted up to $350 million in bogus trades at Kidder. GE investigators are trying to determine whether Jett acted alone or in concert with other Kidder employees.

Although brokerage-house officials are reluctant to comment publicly on the case, the changes at Kidder clearly have sent repercussions throughout the industry. "Every firm will tighten its {ethics} compliance programs because of what's happened at Kidder," says Dean Eberling, who follows the securities industry for investment house Prudential Securities Inc. in New York.

"The Kidder {scandal} raises questions, not so much about compliance programs per se, but internal accounting systems," says veteran Wall Street analyst Perrin Long Jr., an official of First of Michigan Corporation. "Compliance programs have been gradually tightened now for the past decade."

Mr. Long recalls the insider-trading scandals of the mid-to-late 1980s. "In addition, investment houses have tightened their {ethics} programs because of the increasing number of arbitration suits" brought against securities firms by clients who feel that they have not received full earnings or profits on their investments.

Many of the past junk-bond and insider-trading scandals involved what were considered "go-go investment houses," including Drexel Burnham Lambert, and E. …

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