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To: Mr. Jimmy who wrote (26954)	4/26/2002 9:06:58 AM
From: levy	Read Replies (3) \| Respond to of 28311

There in lies the problem...everyone will qualify....from another NYtimes article today "Mr. Spitzer has been demanding that Merrill Lynch pay a large fine and create a restitution fund for investors who bought stocks on the recommendations of the firm's analysts. He has asked the firm for $100 million or more, according to people close to the negotiations." If you want to make any real money on this issue short Merrill or some others ..Merrill is down 20% since Spitzer announced his investigation Who is Captain Tea Bag...is that code for go2pepper? April 26, 2002 S.E.C. Begins Investigation Into Analysts By PATRICK McGEEHAN he Securities and Exchange Commission, the chief regulator of financial markets, announced yesterday that it had begun a formal investigation into Wall Street stock analysts and their potential conflicts of interest. One day after meeting with Eliot L. Spitzer, the New York attorney general, Harvey L. Pitt, the S.E.C. chairman, said the commission would join forces with Mr. Spitzer and other state and federal securities regulators in a "formal inquiry." The commission does not usually announce its investigations but Mr. Spitzer has received a lot of attention in the last three weeks for his investigation of whether analysts at Merrill Lynch and Citigroup recommended stocks to help their employers' obtain or keep investment banking business. Mr. Pitt's announcement signals that other firms on Wall Street will not be left out and that the regulators will seek to propose solutions that will affect all securities firms. Shares of several major securities firms dropped sharply after the announcement. "This is a significant step," said Lewis D. Lowenfels, an authority on securities law at Tolins & Lowenfels in New York. "A federal agency is exercising its jurisdiction to take control of an investigation that has national implications from a policy standpoint." Since last year, regulators at the commission and the National Association of Securities Dealers have been looking into analysts' practices. But turning the effort into a formal investigation gives the commission the power to compel testimony and to issue subpoenas to investment banks for any relevant documents. Mr. Spitzer's investigation, begun last summer, took on a new life after his office gathered e-mail messages written by Merrill analysts that appeared to show that their private opinions of some stocks differed markedly from their public statements. In those messages analysts, including Henry Blodget, a former star analyst at Merrill, called companies they were recommending junk and worse. Talking to reporters after giving a speech in New York yesterday, Mr. Pitt said that it would be irresponsible of the commission to ignore the issues that had been raised in the investigations by Mr. Spitzer and others. He also indicated that the commission wanted to take control of the policing of an issue that many on Wall Street think should be left to federal regulators, not sorted out state by state. In a statement, Mr. Pitt said, "We will give investors confidence that the same securities rules and protections apply no matter where they live or do business." Mr. Pitt said the S.E.C. would coordinate its inquiry with state securities regulators, the New York Stock Exchange and the N.A.S.D. On Wednesday, the North American Securities Administrators Association said that it had formed a multistate panel to study analysts' practices. Mr. Spitzer said in an interview yesterday that he welcomed the involvement of the federal regulators but that he would proceed with his investigation. "I have always believed that the best way to resolve this was to have the regulatory agencies working together," Mr. Spitzer said. "We framed the issue. Now, we need to solve it." He declined to discuss what he and Mr. Pitt talked about when they met in Washington on Wednesday. But he said he intended to continue trying to reach a settlement with Merrill Lynch. Mr. Spitzer has been demanding that Merrill Lynch pay a large fine and create a restitution fund for investors who bought stocks on the recommendations of the firm's analysts. He has asked the firm for $100 million or more, according to people close to the negotiations. Merrill has balked at paying that much and, especially, at admitting any wrongdoing, which could weaken the firm's defenses against lawsuits by investors, these people said. Last fall, Merrill agreed to pay $400,000 to settle a complaint a customer brought against the firm and Mr. Blodget. Mr. Spitzer has also asked Merrill to make structural changes to increase the insulation of its analysts from the firm's investment bankers and their corporate relationships. Merrill officials proposed setting up a board for its research department, with the majority of them coming from outside the firm and reporting directly to the firm's senior executives. But Merrill is reluctant to agree to significant changes that might handicap it in competing with other firms that have not made such changes, people close to the firm said. Even Mr. Spitzer has acknowledged that Merrill has done more to insulate analysts from bankers than some of its major competitors. "It may be that what we want Merrill to do is more substantial than what others are thinking of," Mr. Spitzer said. Merrill's stock fell another 4.8 percent yesterday, to $42.50, and is now down 21 percent since Mr. Spitzer released the e-mail messages on April 8.