Brokers Settlement Called Imminent; Spitzer Says Rules on Independent Research Are Key to Any agreement.(BUSINESS)

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Byline: Tim Lemke, THE WASHINGTON TIMES

The top investigator looking into conflicts of interest on Wall Street yesterday confirmed that a settlement with large brokerage houses is imminent.

New York Attorney General Eliot Spitzer, appearing on ABC's "This Week" program yesterday said a deal would be reached by the end of the year but denied reports that it would be finalized as soon as this week.

"It may not be this week, but we're going to get there," said Mr. Spitzer, who declined to specifically discuss reports that said several Wall Street firms would be fined as much $200 million each as part of the settlement. He said fines will be imposed but that changes in rules governing the relationship between investment advice and banking units were more important.

"They'll pay big sums of money is my guess," Mr. Spitzer said. "The money is less important to the small investor than changes to rules of the game."

Key to any settlement, Mr. Spitzer said, would be rules dictating that brokerage firms hire independent research companies to dispense advice in addition to that given by in-house analysts.

Stephen Cutler, the enforcement chief for the Securities and Exchange Commission, has backed the plan.

Most Wall Street firms already have agreed to create a division between research and investment banking departments so that the two businesses have different management, legal departments and compensation committees. Mr. Spitzer said yesterday that he still favors the creation of an oversight board to do independent research for clients of large brokerage houses.

Mr. Spitzer responded to criticism that the private negotiations with brokerage firms might lead to a settlement favoring the large companies. Critics of the talks argued that a more open debate on the matter, including congressional hearings, would be likely to produce greater penalties. …