- The Washington Times - Friday, April 26, 2002

ALBANY, N.Y. (AP) The Securities and Exchange Commission is starting a "formal inquiry" into Wall Street analysts' conflicts of interests, the federal agency and New York Attorney General Eliot Spitzer said yesterday.
The inquiry will be conducted by the SEC, the New York Stock Exchange, the National Association of Securities Dealers (NASD), Mr. Spitzer, the North American Securities Administrators Association and several states, according to a statement released by Mr. Spitzer and the SEC.
"We look forward to working with the SEC," said Darren Dopp, a spokesman for Mr. Spitzer. "It doesn't end our investigation. We will be working with them."
SEC Chairman Harvey L. Pitt said the disclosures that resulted from Mr. Spitzer's investigation, as well as practices uncovered by the SEC, the stock exchange and the NASD, "reinforced the commission's conclusion that further inquiry is warranted."
"We will give investors confidence that the same securities rules and protections apply no matter where they live or do business," he said.
Mr. Pitt also announced that on May 8 the SEC will consider analyst rules proposed in February by the exchange and the NASD. The proposals would address conflicts involving analysts.
Mr. Spitzer previously said he was working with the federal agency and they shared the same goal, but the SEC wasn't part of the investigation.
The attorney general met with SEC officials this week in Washington, in what his spokeswoman called a productive discussion. Mr. Spitzer unsuccessfully lobbied Congress on Wednesday for an amendment to an Enron-inspired bill that could address conflicts of interest by stock analysts nationwide.
Mr. Spitzer has secured a court order under which Merrill Lynch & Co. has agreed to greater disclosure when its stock analysts rate companies that are Merrill Lynch's investment banking clients. He has subpoenaed at least six other major Wall Street brokerages.
Using e-mails he obtained through subpoenas, he accused analysts of encouraging investors to buy stocks the analysts privately criticized to secure or retain investment banking business. He announced the Merrill Lynch case on April 8.
Mr. Spitzer and Merrill Lynch are negotiating a fine and payment for investors who lost money based on the stock recommendations of the firm's analysts and for larger-scale reforms for its stock-research division. The changes are expected to serve as an industry model.


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