More Talks Expected in Wall Street Analyst Probe

After months of investigations and weeks of negotiations, Wall Street firms and government regulators may know this week whether they’ll soon be able to reach a comprehensive settlement over stock-analyst conflicts.

The two sides will hold meetings Wednesday through Friday, sources said. They hope to reach tentative agreements on the formal charges that the government would bring and how much the brokerage firms would pay to settle those charges, sources said.

Both are key issues, and consensus between regulators and a majority of the firms could signal that a final deal is within reach. But it is uncertain how many of the 12 firms under investigation would agree to the details by Friday.

“That would be a very big step forward,” one regulator said late last week. But “it doesn’t mean it’s going to happen.”

As they did over a three-day period in late November, regulators will hold one-on-one meetings with individual companies, sources said.

At the first round of meetings, regulators told each company how much it would have to pay in fines and what charges the government was considering lodging against it.

At the high end of the scale, Citigroup Inc., owner of Salomon Smith Barney, could be fined $500 million, and Credit Suisse First Boston could pay as much as $250 million. Some companies have since made counteroffers, one regulator said.

More than the fines, many firms are concerned about the charges that could be leveled at them, government and corporate sources said. The companies fear that allegations of serious wrongdoing could worsen their potential liability in lawsuits and arbitrations brought by individual investors.

“A lot of negotiating is happening over how the violations are defined,” one regulator said. “There’s a lot of back and forth right now.”

The probes by state and federal regulators center on whether stock analysts intentionally skewed the advice they gave to investors during the 1990s bull market. Investigators have uncovered e-mails and other documents indicating that analysts at major firms touted stocks they did not believe in so their firms could win lucrative investment-banking work.

The firms are expected to pay $1 billion or more in fines. They are expected to shell out an additional $1 billion over five years to distribute independent research to individual investors.

Both sides hope to finalize a deal by Christmas. The firms want an end to bad publicity, and the regulators want to finish their resource-draining probes.

They have been known as “global” settlement talks because regulators are negotiating simultaneously with a dozen firms over a single issue. In practical terms, however, regulators would have to reach individual deals that would call for differing charges and fines based on each firm’s alleged culpability.

If a deal cannot be reached with any firms, regulators could have to wage potentially time-consuming court battles.

Some firms think they can reach agreements in principle by the end of the week.

“If the language is acceptable, I imagine there would be agreements in principle,” said an official at one firm.

However, an executive at another investment bank said significant differences remain.

“There’s a fair amount of distance,” the executive said. “That’s a lot to pull together” so close to the holidays.