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Merrill settlement closer
Sources say settlement between Merrill Lynch and N.Y. attorney general could come in a week.
April 30, 2002: 7:38 PM EDT

NEW YORK (CNN/Money) - Executives at Merrill Lynch & Co. are hoping a settlement with the New York attorney general over alleged conflicts of interest between the brokerage firm's research and investment banking arms could come within the next week, sources familiar with the matter told CNNfn Tuesday.

Also on Tuesday, Morgan Stanley confirmed it has received a request from the Securities and Exchange Commission for information on its research department.

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The SEC has also made formal requests to nine other Wall Street firms, according to The Wall Street Journal.

"Morgan Stanley believe the SEC inquiry into analysts is appropriate," a spokeswoman for the firm said. "Ensuring the public's trust in capital markets is paramount."

Salomon Smith Barney, Credit Suisse First Boston and Lehman Bros. declined to comment. Goldman Sachs and Bear Stearns could not immediately be reached for comment.

Merrill (MER: down $0.17 to $41.94, Research, Estimates) has already agreed to Attorney General Eliot Spitzer's request for greater disclosure of its business relationships with companies covered by its analysts. The company is now talking with Spitzer's office about further possible actions, including more reforms to its research department, an admission of wrongdoing and a fine.

Sources told CNNfn Tuesday daily negotiations continue between lawyers for both sides, but as of now no meeting has been scheduled for Merrill Chairman and CEO David H. Komansky and President E. Stanley O'Neal to meet with Spitzer.

On Monday, Komansky told Lou Dobbs Moneyline the settlement with Spitzer is critical to the firm at this time, but even more critical is restoring investor confidence. He said the brokerage plans to institute more checks and balances on the research department, but did not specify what those would be.

But Komansky denied that investment banking and research needed to be under separate roofs to work.

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"The fact of the matter is that I feel that investment banking and research and brokerage can be fully compatible in a full-service firm," he said. "I think it is part of the value proposition that we put forward. And the essence of the issue in my opinion is managing the inherent conflicts that do arise."

Last Friday Komansky issued a rare public apology for e-mails by Merrill analysts released by Spitzer's office, saying they fall far short of the company's professional standards.

The e-mails, including some from former analyst and Internet guru Henry Blodget, suggest Merrill analysts were uncomfortable with the pressure being applied by investment banking customers in reaction to potential negative comments from analysts.

If a settlement is not reached, the parties are scheduled to be in New York Supreme Court on May 9 to schedule depositions as the case moves to a discovery phase.  Top of page


- CNNfn's Allan Dodds Frank contributed to this report.






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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.