Marketplace: News Archives

Tuesday, April 9, 2002
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It's Tuesday, the 9th of April. I'm David Brancaccio.

One of the country's oldest investment firms is being ordered to reform business practices that allegedly helped the company, but hurt investors. Armed with a court order, New York's Attorney General is forcing Merrill Lynch to disclose if it has -- or even intends to have -- an investment relationship with companies with stocks Merrill evaluates. The ruling is the result of a 10-month investigation into Merrill Lynch. But it could have implications for the entire financial industry, as Marketplace's Business Editor Cheryl Glaser explains.

Glaser: "Many Wall Street firms don't make most of their money analyzing stocks. That's pocket change compared to the money they can make from other services, like advising companies on mergers and acquisitions, or helping them bring a stock offering to market. So imagine the pressure to hype some of these stocks. Nell Minnow is a shareholder rights activist:"

Minnow: "It's kind of like Lake Woebegone. If you listen to the analysts, all the children are above average. They're always telling you to hold onto stock."

Glaser: "Critics have said for years this is an industry-wide problem. But in this case, the New York Attorney General singled out Merrill Lynch. The court order forces that brokerage alone to disclose potential conflicts of interest. Justin Lahart is associate markets editor at TheStreet.com:"

Lahart: "Mr. Spitzer, the Attorney General of New York, probably went after Merrill first just because it's so public. It is the biggest broker with the most clients."

Glaser: "New York Attorney General Spitzer said he doesn't know how much money investors lost as a result of Merrill Lynch's practices, but he thinks the number of people hurt is 'in the hundreds of thousands, if not millions.'

Shareholder activist Nell Minnow admits the kind of disclosures required by yesterday's ruling could get lost in the fine print. But she says it's still a step in the right direction."

Minnow : "I think the fact that this order is getting so much publicity will cause people to be a lot more skeptical about these reports. It particularly bugs me that I think that the people who pay the most attention to these reports are the people in the worst possible position, when it comes to losing money. They're the individual investors who don't have time to do independent research, so they rely very heavily on what they hear from the analysts."

Glaser: "Merrill Lynch denies the allegations that it provided investors with tainted advice. And in fact, the firm has already implemented some reforms on its own. Last summer, it became the first major securities firm to bar its analysts from buying stock in the companies they cover.

But yesterday's court order requires Merrill Lynch to red-flag even potential conflicts for investors. The New York Attorney General's office says its investigation has expanded to other brokerage houses, a signal to other firms that they could soon face similar disclosure requirements.

I'm Cheryl Glaser for Marketplace."

Rundown

Corporate Name Game
As we speak, Arthur Andersen in engaged in a desperate struggle to save itself. When corporate misconduct hits the front page, what steps can a company take to revive its public reputation? From our nation's capitol, John Dimsdale has the story.

Enron's Subsidies
Doing the numbers on energy subsidies...The U.S. government invests heavily in international energy projects by American firms. Commentator Daphne Wysham expresses her outrage at the variety of Enron energy projects overseas that were heavily funded by, none other than, U.S. taxpayers. »Check out Daphne Wysham's Web site

Music Bridge: Support - Sixtoo

UK Gambling
Great Britain is gearing up to lift many restrictions on gambling within its borders. But is "merry old England" ready to play high-stakes poker with some of the world's high rollers? Are the charming seaside towns who have some small share of the current gambling business ready to go Vegas? Marketplace's Stephen Beard reports on, and "The Economist's" David Manasian weighs in on, the new British rules.

Music Bridge: Casino Royale - Herb Alpert and the Tijuana Brass

Alaska To Asia
When you think of Alaska seafood, visions of grilled salmon or king crabs might dance in your head. But much of Alaskan seafood has almost no domestic market. Jay Marble has this report on the real market for Alaska's biggest exports -- Asia.

Music Bridge: Anchorage - Michelle Shocked

Look Ahead
Coming up on Marketplace, American nuclear power plants are beefing up security -- and making sure everyone knows about it. In striking advertisements in magazines and newspapers, featuring machine-gun-wielding security guards, the Nuclear Energy Institute is launching a campaign to quell any potential public anxiety about nuclear safety.