Merrill settles in share tipping row

Eliot Spitzer (inset) could still chase other banks

Investment bank Merrill Lynch has said it is to pay $100m to settle an investigation by the New York attorney general into allegations its analysts misled tech stock investors.

Sadly, our reputation has been impacted, and it's something we're going to work hard to re-establish

Merrill Lynch chairman David Komansky

The bank, which is not admitting any wrongdoing, will pay $48m to New York state and $52m to other US states, Merrill said in a statement.

Under the deal, Merrill Lynch has agreed to sever all links between analysts' pay and investment banking revenues.

Merrill, one of Wall Street's most prestigious names, has also issued a public apology to its clients, shareholders and employees.

Merrill stock rises

New York attorney general Eliot Spitzer told reporters the agreement should help to overcome "inherent tensions" within US investment banks.

"If necessary, firewalls have to be constructed," he said.

But he rejected suggestions that affair showed evidence of corruption on Wall Street.

The new regime at Merrill Lynch will be overseen by a "compliance monitor," whose appointment must be approved by the attorney general.

In New York, Merrill Lynch shares closed 47 cents higher at $43.85 on Tuesday, off earlier highs.

Regrets

The affair stemmed from allegations that Merrill Lynch analysts tipped stocks they privately disparaged so as to keep open the possibility of gaining investment banking business from the companies concerned.

One Merrill analyst allegedly described one such stock as "a piece of ****" in an internal e-mail.

"We sincerely regret that there were instances in which certain of our Internet sector research analysts expressed views that at certain points may have appeared inconsistent with Merrill Lynch's published recommendations," the bank said in a statement on Tuesday.

The settlement also requires Merrill analysts to state whether the companies they are rating are also investment banking clients.

Troubles ahead

Attorney General Spitzer is pressing ahead with investigations into similar alleged conflicts of interest at other major US brokerages.

And Merrill is still facing up to two dozen private lawsuits from investors who claim the bank's investment advice lost them money.

"Sadly, our reputation has been impacted, and it's something we're going to work hard to re-establish," said Merrill Lynch chairman David Komansky.

He added that he did not believe the affair had compromised the integrity of Merrill Lynch's research.