BloombergBusiness (May 11, 2003 ) — Want to make Wall Street pay for its sins? Here’s your chance. The landmark analyst fraud settlement establishes a $387.5 million restitution fund for investors who got bum advice. It also offers a treasure trove of evidence to use in arbitration proceedings and class actions. “We’ve been given the ammunition we need,” says Jacob Zamansky, the Manhattan attorney whose case against Merrill Lynch & Co. two years ago triggered New York State Attorney General Eliot Spitzer’s initial investigation into Wall Street.

Sounds pretty promising — but don’t go counting your money just yet. Not everybody will be able to apply for the new restitution fund or use the smoking-gun documents in legal actions against their brokers. Those who are eligible for restitution or arbitration could conceivably wind up recovering all of their losses. But those who aren’t will be lucky to get back 10 cents on the dollar. Are you one of the fortunate few? Here’s how to tell — and what to do if you’re not covered by the global settlement.

Did you have an account with one of the 10 firms that signed the pact?

The settlement most directly benefits investors who were customers of Bear Stearns; Credit Suisse First Boston (CSR); Goldman Sachs (GS); Lehman Brothers (LEH); J.P. Morgan Securities (JPM); Merrill Lynch (MER); Morgan Stanley (MWD); Salomon Smith Barney (C); UBS Warburg; and U.S. Bancorp Piper Jaffray (USB).

Did you invest in one of the stocks that these firms’ analysts promoted?

Forget about cashing in if you lost money on, say, auto stocks. The settlement only helps people who invested in highly-trumpeted bubble issues such as Level 3 Communications (LVLT), Adelphia Communications, Metromedia Fiber Network, Focal Communications (FCOM), and InfoSpace.

Did you keep good records?

The system is designed to compensate people who were misled by their brokerage houses — not those who lost money because of their own greed or stupidity. Investors are going to have to come up with proof that the analyst’s rating was the reason for buying the stock. Unambiguous evidence might include a printout of an e-mail from your Salomon Smith Barney broker urging you not to bail out of Focal Communications Corp. because Jack Grubman continued to rate it a buy. “If you kept notes of your phone conversations with your broker, they’re worth their weight in gold,” says David Robbins, a New York investors’ attorney. Most people won’t have such strong evidence. They may still get some compensation, but not as much as they would with documentation of their reliance on tainted advice.

Did you lose a lot of money?

Plaintiffs lawyers work for a contingency fee of about 33% of the money they recover. The best ones rarely accept cases involving losses of less than $100,000 because the payout is too small to be worth the risk. As a result, it may be hard for many small investors to find quality counsel. But a few experienced investor attorneys are taking small cases. For example, Boyd Page, an Atlanta lawyer, is preparing to file scores of arbitrations using a special, expedited written procedure for shareholders who lost less than $25,000. “When there are hundreds of investors with similar cases, it makes it economical,” he says.

So what’s next?

If you answered yes to all four of these questions, then hurry up and get a lawyer. A long line of claimants is likely to produce big delays. A good place to start looking is the Public Investors Arbitration Bar Assn. (www.piaba.org).

If you don’t fit the above criteria, there’s nothing much for you to do. If you invested in a heavily promoted tech stock that collapsed, odds are that plaintiffs attorneys have already filed a class action on your behalf. Hundreds of thousands of shareholders, for instance, may be covered by a class action filed in New York alleging that 55 underwriters and more than 300 companies fraudulently took advantage of the initial public offering market.

This lawsuit, and dozens of similar cases, will be helped by the documents regulators have released. If the efforts succeed, one day, many months from now, a letter may arrive announcing that you’re entitled to get some of your money back. But don’t get your hopes up. If history is any guide, the payout will be less than 10% of your losses.