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Merrill Lynch Cuts Checks for Settlement

Nov 28, 2002 | AP

Merrill Lynch has sent a stack of checks totaling roughly $100 million to 48 states, Washington D.C. and Puerto Rico, under an agreement negotiated earlier this year with New York state to settle charges its analysts misled investors.

The checks were cut Monday and have either been received by most states or will be shortly, said Merrill spokesman Mark Herr.

Merrill, the nation's largest brokerage, agreed to the fine in May after a 10-month investigation by New York Attorney General Eliot Spitzer that uncovered e-mails from Merrill analysts disparaging stocks they publicly praised, allegedly to win lucrative investment banking business. The agreement forced the firm to separate research from its investment banking division, a move mirrored by Citigroup last month.

Creating a firewall between research and banking has been a hot topic under discussion between big Wall Street firms and securities regulators now nearing a settlement on how best to resolve such conflicts of interests. Fines in this broad settlement are expected to exceed $1 billion and come from several top firms, including Goldman Sachs, Morgan Stanley and Lehman Brothers.

Under the terms of Merrill's settlement, New York state received the highest payout with $48 million because it took the lead in the investigation, said Marc Beauchamp, executive director of the North American Securities Administration Association, an umbrella group for state securities regulators.

Beauchamp's group received $2 million, while the remaining $50 million went to the other states, with the largest amounts going to those with the most people. California, for instance, took in $5.6 million, while Wyoming received $500,000, a floor set for the smaller states.

The lone holdouts not signing off on the national settlement with Merrill are Arizona and Missouri, slated to be paid $854,732 and $932,128, respectively, when they hammer out their differences with Merrill, NASAA and Merrill said.

"We continue work with these two states and are confident to get things resolved with them as soon as possible" Herr said.

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