To: Kayaker who wrote (52538 ) 4/18/2002 1:55:50 AM From: puborectalis Respond to of 99280 Merrill, Spitzer Near Settlement in Conflict-of-Interest Investigation Settlement talks between Merrill Lynch & Co . (MER) and New York Attorney General Eliot Spitzer over conflict of interest involving corporate research will likely lead to an industrywide framework designed to reform how Wall Street research departments rate stock for investors, Thursday's Wall Street Journal reported. The two sides held serious settlement talks Wednesday about the nature of a deal in which Merrill would enact major changes in the way it provides research on corporate clients that also provide the firm with big fees from investment banking assignments. Officials close to the negotiation say a deal could be reached by the end of the week. A sign that industry officials see the talks as setting a pattern for Wall Street is the presence of top Washington regulators. Meeting with the attorney general's office were officials from the Securities and Exchange Commission -- David Becker, the agency's general counsel, and Annette Nazareth, head of the market regulation division. People close to the talks say progress was made on crafting a deal, particularly on enacting structural changes for Merrill to enact. Mr. Spitzer has threatened that Merrill, if it refused to agree to major changes in its research process, could face criminal charges that the firm misled investors with overly optimistic research. At first Merrill balked, but Mr. Spitzer then released e-mails -- some of them derogatory -- showing analysts harbored doubts about stocks that received higher public ratings. The publicity, much of it centering on the calls of former Merrill Internet stock star Henry Blodget, caused shares of Merrill to decline 12% last week. As a result, Merrill asked Mr. Spitzer to begin settlement talks with the eye on resolving the matter sometime this week, possibly as early as today. Neither Mr. Becker nor Ms. Nazareth returned calls for comment; the SEC had no comment. Wall Street Journal Staff Reporter Charles Gasparino contributed to this report.