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The Honolulu Advertiser
Posted on: Tuesday, December 10, 2002

Deal with brokers expected in 2 weeks

By Michael Gormley
Associated Press

ALBANY, N.Y. — Regulators negotiating a settlement with Wall Street's biggest brokerages, aimed at preventing conflicts of interests by stock researchers, hope to reach an agreement within the next two weeks.

New York Attorney General Eliot Spitzer would like to wrap up negotiations by Christmas week, his spokesman Darren Dopp said yesterday, although he and industry sources cautioned that difficult details still must be worked out.

"We continue to make progress and we're hopeful that a resolution can be reached soon," Dopp said.

Under the deal to end investigations into conflicts of interest, brokerages would agree to structural reforms and what industry sources have said will likely be a $1 billion payment.

A dozen major brokerages are meeting in New York with regulators tomorrow, Thursday and Friday. This comes after brokerages gave initial support in late October to a package of reforms proposed by Spitzer and Steven Cutler, the Securities and Exchange Commission's director of enforcement. Under the proposal, firms would have to provide investors with independent research, funded by the brokerages, industry sources have said.

SEC spokesman John Nester and representatives from some major brokerages would not comment.

The so-called global settlement follows Spitzer's investigation of investors who were advised to buy stocks that analysts privately derided in order to bolster the stocks' value and lure the companies as investment banking clients. In May, Merrill Lynch & Co., the nation's largest brokerage firm, agreed to a settlement with Spitzer's office that included a $100 million fine and the separation of its analysts from investment banking.

Brokerages are motivated to quickly agree to the global settlement, possibly within a couple weeks, said Chuck Hill, head of research at Thomson First Call. "I think from the banking side, the attitude is to get it done as soon as possible," Hill said yesterday.