NEW YORK (CNN/Money) - Talks between Merrill Lynch and the New York state attorney general's office have hit a snag over the separation of the firm's research and banking arms, a published report said Friday.

According to the Wall Street Journal, talks between New York Attorney General Eliot Spitzer and Merrill over a possible settlement for alleged conflicts of interest have stalled. At issue, the newspaper reported, is whether or not analysts still can accompany investment bankers to pitch deals to potential clients.

Merrill (MER: up $0.38 to $43.32, Research, Estimates) already has agreed to further disclosure of its banking relationships after Spitzer produced a number of e-mails indicating Merrill's Internet analysts believed companies deserved a poor stock rating but kept the ratings high due to banking relationships.

Spitzer is adamant analysts should not be allowed to help pitch banking deals, but Merrill is convinced it would put them at a competitive disadvantage, the Journal reported.

A spokeswoman for Spitzer said the attorney general's office has always been adamant that there be no direct link between investment banking and research.

A Merrill spokesman declined to comment.

The two sides also are negotiating the size of a possible fine Merrill would pay and also an admission of wrongdoing by the firm. Sources tell CNNfn a settlement is not expected for at least two weeks.

If no settlement is reached, Spitzer's office has said, it could file civil or even criminal charges against Merrill.

As Merrill's talks bogged down, more regulators joined Spitzer in investigations of major brokerages.

Officials at Spitzer's office and the Securities and Exchange Commission have met with officials from the New York Stock Exchange and the National Association of Securities Dealers to try to generate a list of uniform rules that would cover Wall Street analysts and investment banks, sources close to the investigation told CNNfn.

On Thursday, the North American Securities Administrators Association (NASAA) confirmed that 12 states will make up a task force investigating brokerages across the country.

In addition to New York, California and New Jersey, which were named to chair the task force April 23, Alabama, Arizona, Connecticut, Florida, Illinois, Indiana, Massachusetts, Utah and Washington will conduct the investigation.