Wall St. analysts targeted

["Charles Brown" <CharlesB@xxxxxxxxxxxxxxxxxxxxx>]

Wall St. analysts targeted
30-state task force probes allegations of conflicts of interest

By Michael Gormley / Associated Press

http://www.detroitnews.com/2002/business/0205/24/b03-497998.htm

   ALBANY, N.Y. -- Securities regulators from 30 states have joined a task force investigating alleged conflicts of interest among stock analysts at Wall Street brokerages, an organization representing the regulators said Thursday.
   The formation of the task force was announced a month ago after New York Atty. Gen. Eliot Spitzer revealed results of an investigation he said showed that Merrill Lynch & Co. analysts misled investors by promoting stocks they privately disparaged in e-mail messages.
   Michigan is a party to the investigation, officials at the Office of Financial and Insurance Services in Lansing said Thursday, although they couldn't elaborate on how long the process may take or what benefits customers within the state may receive.
   Twelve states were initially involved in the task force's investigation into Merrill Lynch's major competitors, but more states followed suit in recent weeks, said Ashley Baker, a spokesman for the North American Securities Administrators Association said.
   "We're looking at this, I think, in a pretty simple way," Baker said. "Was there a fraud? Were people privately holding one opinion and publicly issuing another?"
   Spitzer and Merrill Lynch this week announced a settlement requiring the firm to pay a $100 million fine to be shared among New York, the other 49 states, the District of Columbia and Puerto Rico.
   The deal also calls for Merrill Lynch to stop rewarding analysts for helping to bring in lucrative investment banking fees for arranging mergers and new stock offerings.
   Instead, analysts are to be paid solely for the quality of their stock research. Spitzer says the move should help prevent analysts from giving shares of some companies positive ratings to help win investment banking business from the same companies.
   Merrill Lynch and Spitzer announced their settlement Tuesday, and the Salomon Smith Barney investment banking division of Citigroup Inc. said Wednesday that it would adopt the terms of the settlement affecting analysts.
   Baker could not immediately provide a list of the 30 states that that have joined the task force, though officials have previously said New York, New Jersey and California were leading the investigation.
   If the task force's investigation uncovers analyst conflict of interests at other brokerages, the association will encourage state regulators to adopt settlements similar to the one Spitzer reached with Merrill Lynch, Baker said.

Detroit News staff writer Mike Hudson contributed to this report.