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First the cosh, then the headache

A popular statistic in the UK is that you are more likely to get a divorce than to change your bank account. It's probably fictitious, but Merrill Lynch executives must be hoping that there's some truth to it.

The high-profile battle between the US broker and Eliot Spitzer, the New York State attorney general, has been highly embarrassing. It has called Merrill's integrity into question and left it with one of the largest ever securities-related fines of $100 million (which is still less than half what the firm spent on stationery last year). The settlement may not prevent individuals bringing lawsuits of their own, or joining a class-action suit.

The deal with Spitzer includes an agreement to reform the relationship between Merrill's investment bank and its research arm. This follows Spitzer's allegation that Merrill misled retail investors with over-optimistic research recommendations on firms that were also its investment banking clients.

While Merrill denied the charges, Spitzer released email correspondence from Merrill analysts who were far from positive in private about the stock tips they were in public enthusiastically touting. Merrill is paying out $48 million to New York and $52 million to other states but won't concede culpability.

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