DJ SEC Unlikely To Press Charges Over Bear Stearns Statements
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By Jed Horowitz
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The Securities and Exchange Commission is unlikely to bring enforcement actions over Bear Stearns Cos.' (BSC) assertions that it was in good shape prior to the public announcement that it would be taken over by JPMorgan Chase & Co. (JPM).
The SEC's enforcement division said it would "favorably take into account the circumstances...of the acquisition when considering whether to recommend enforcement action against JPMorgan related to statements made by Bear Stearns before Sunday's announcement of the merger," the SEC said in an information sheet for investors on the planned takeover.
As recently as last Wednesday, Bear Stearns Chief Executive Alan Schwartz said on CNBC the company had no problems with liquidity. Two days earlier he told the network that Bear's "balance sheet, liquidity and capital remain strong" while Executive Committee Chairman Alan "Ace" Greenberg said rumors about liquidity problems were "totally ridiculous." By Friday, Bear told regulators it was ready to file for bankruptcy, and on Sunday agreed to be sold to JPMorgan for $2 a share. Its shares were worth $30 two days earlier.
The SEC did not address whether it could sue Bear Stearns directly, but a person close to the agency and lawyers said by the time any enforcement action were concluded Bear Stearns would not exist. JPMorgan said it hopes to close the deal by the end of June.
Even if Bear Stearns shareholders' refuse to accept the offer, which was guided by officials from the Federal Reserve Board and the U.S. Treasury Department, it would likely be in the hands of another bidder or the bankruptcy court. The SEC can, however, sue individuals.
The SEC information sheet said it was in close contact with officials of the Fed, Treasury Department, JPMorgan Chase and Bear Stearns during the negotiations. Its enforcement division gave no assurances about possible future enforcement actions, but confirmed that it would remain consistent with "prior statements and guidance" about looking favorably on cooperative companies.
Other SEC divisions offered assurances that they would not enforce, or would grant temporary relief for, violations stemming from timing and other requirements related to brokerage and investment management activities.
The SEC notice, released as answers to frequently asked questions, also chronicled how rapidly Bear Stearns' liquidity pool declined on rumors of its liquidity problems last week, and reminded investors that their claims for funds and securities are preferred over other claims in events of a bankruptcy. It also noted that the Securities Investor Protection Corp. guarantees remaining customer securities claims up to $500,000.
By Jed Horowitz, Dow Jones Newswires; 201-938-4047; jed.horowitz@dowjones.com
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