Merrill, N.Y. Attorney General Agree on Disclosure (Update2)
Merrill, N.Y. Attorney General Agree on Disclosure (Update2)
(Adds details about disclosure agreement.)
New York, April 18 (Bloomberg) -- Merrill Lynch & Co. agreed
to increase disclosure of investment banking ties with companies
its analysts cover, following allegations that the firm's research
is fraudulent. Merrill and New York's attorney general are still
discussing possible fines and changes in its business practices.
New York Supreme Court Judge Martin Schoenfeld last week
ordered the biggest securities firm by capital to disclose more
about potential conflicts of interest.
``We will continue to negotiate with Merrill Lynch in an
effort to reach a final settlement that corrects the fundamental
structural flaws at Merrill and provides permanent relief for the
company's state securities law violations,'' Spitzer's office said
in a statement. ``Although we are still negotiating, serious
issues remain to be resolved before we can reach a final
agreement.''
By Wednesday, the firm will set up an Internet site that will
disclose what companies it has advised in publicly announced stock
sales or mergers during the past year.
By June 3, the firm will replace the Web site and start
disclosing on research reports compensation the firm has received
from its corporate clients in the past 12 months. The information,
which will be on the first page of its reports, will also say
investors should assume Merrill ``is seeking, or will seek
investment banking and other business from the covered company,''
the firm said.
Merrill will also disclose the percentage of ``strong buy,''
``buy,'' ``neutral'' and ``reduce/sell'' ratings for stocks it
covers.
`Tightrope Walk'
``Merrill wants to satisfy the concerns of the government and
set standards without admitting they did anything wrong,'' said
David Robbins, a New York securities lawyer and former prosecutor
in the attorney general's office who isn't involved in the case.
``It's a tightrope walk without a net.''
A Merrill spokesman declined to comment further.
Merrill Lynch is a passive, minority investor in Bloomberg
LP, the parent of Bloomberg News.
Spitzer last week released e-mail messages from Merrill
employees, including Internet analyst Henry Blodget, discussing
companies the firm covered and their relationship with investment
bankers. He cited e-mails in which unidentified officials
described Internet companies such as At Home Corp. as a ``piece of
crap'' and InfoSpace Inc. as a ``piece of junk'' while analysts
maintained positive ratings on the companies.
He described Blodget as the ``paradigm of the problem'' with
Wall Street research, which has come under fire since shares of
technology companies, which surged in the late 1990s, plunged.
In July, Merrill agreed to pay $400,000 to an investor who
sued the firm, arguing Blodget's ``buy'' recommendation on
InfoSpace Inc. existed to support a transaction being handled by
Merrill's investment bankers. |
