Merrill Says It's Sorry
Updated from 3:33 p.m. EDT
Merrill Lynch
(MER)
Chief Executive David Komansky apologized Friday for the now-notorious emails in which Merrill analysts disparaged stocks that they were simultaneously plugging to investors.
"The emails that have come to light are very distressing and disappointing to us," Komansky told shareholders at the company's annual meeting. "They fall far short of our professional standards, and some are inconsistent with our policies."
The messages were uncovered early this month in an investigation of analyst conflicts of interest by New York Attorney General Eliot Spitzer. In July of last year, Spitzer began investigating Wall Street brokerages, seeking evidence that their equity analysts wrote favorable research reports on stocks in order to obtain investment banking business.
Many investors got burned heeding the analysts' buy recommendations even as the shares plummeted, sometimes to zero. Merrill has already agreed with New York state to increase disclosure on its analyst equity research reports and is discussing further terms of a settlement.
Komansky's regret might reflect more than conscience in light of the potential penalties hanging over the firm. A spokeswoman for the attorney general's office called the apology "a good first step," adding: "contrition has always been a critical part of initial discussions to resolve the matter."
Merrill shares, which have lost 21% since April 8 when the discovery of the emails was made public, closed Friday up 2% to $43.38. Other brokerage shares also rose.
In addition to Merrill, brokerages currently under scrutiny in the investigation include
Goldman Sachs
(GS) - Get Report
,
Credit Suisse First Boston
,
Morgan Stanley
(MWD)
,
Lehman Brothers
(LEH)
,
Citigroup's
(C) - Get Report
Salomon Smith Barney unit,
UBS PaineWebber
,
Lazard Freres
and
Bear Stearns
(BSC)
.
Brokerage stocks fell Thursday when the
Securities and Exchange Commission
said it would join Spitzer's investigation. Observers and investors fear the escalating probe could fuel an
explosion of civil litigation and result in billions of dollars settlement costs for the industry.
