Tags: Merrill | Lynch | N.Y. | Reach | $100 | Million | Deal

Merrill Lynch, N.Y. Reach $100 Million Deal

Tuesday, 21 May 2002 12:00 AM

The settlement requires a $100 million civil payment.

"This is a significant amount of money for any company, and it will send a message ... that this type of behavior is unacceptable," said Spitzer of the Merrill Lynch stock research and rating practices that had been under investigation.

The agreement settles all aspects of the state's inquiry into Merrill Lynch practices and all present and former employees. The inquiry centered on Merrill Lynch's Internet sector securities research and reporting from 1999 to 2001.

Under terms of the agreement, the settlement represents neither evidence nor admission of wrongdoing or liability and provides for Merrill Lynch to make a civil payment of $48 million to New York, and an additional $52 million to settle the matter with all other states, with payments contingent on acceptance of the agreement by all states.

"Because our many employees work day after day to place our clients' interests first, resolution of this matter is very important to us. Today's result will ultimately benefit all investors and the capital markets," said David H. Komansky, Merrill Lynch chairman and chief executive officer, and Stan O'Neal, president and chief operating officer.

"Our objective from the start has been to reinforce investor confidence in the way securities analysts conduct their research and make investment recommendations. The actions we are taking will ensure that analysts are compensated only for activities intended to benefit investors. We believe this establishes a new industry standard for independence and objectivity of research," they said.

Under the agreement, Merrill Lynch said it would implement a complete separation of the evaluation and determination of research analyst compensation from the investment banking business, to be achieved through new policies.

The firm said research analysts would be compensated for only those activities and services intended to benefit Merrill Lynch's investor clients.

The firm will create a Research Recommendations Committee to review all initiations of and changes to stock ratings for objectivity, integrity and a rigorous analytical framework.

Merrill Lynch said the RRC would include representatives of private client and institutional sales management, research management and research strategists. It is to be headed by an individual who will be paid primarily based on the performance of search recommendations for investors.

Merrill Lynch will appoint a compliance monitor who will ensure compliance with the agreement for one year and implement a system to monitor electronic communications between investment bankers and equity research analysts.

Merrill Lynch said its equity research reports would contain added disclosures that might reveal any potential conflict of interest regarding the companies covered by Merrill research analysts. Copyright 2002 by United Press International.

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The settlement requires a $100 million civil payment. This is a significant amount of money for any company, and it will send a message ... that this type of behavior is unacceptable, said Spitzer of the Merrill Lynch stock research and rating practices that had been...
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2002-00-21
Tuesday, 21 May 2002 12:00 AM
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