Wall Street banks face investigation

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The chances of further legal action against Wall Street banks over allegedly biased analyst research increased yesterday after an umbrella body for US state securities regulators launched an investigation into investment banking conflicts of interest.

The North American Securities Administrators Association (Nasaa) said it was forming a multistate task force that would follow up issues raised by the investigation by the New York Attorney General Eliot Spitzer into Merrill Lynch and other securities firms. Mr Spitzer will co-chair the national task force.

Officials from the US markets' regulator, the Securities and Exchange Commission, are also expected to meet with Mr Spitzer today to discuss his investigation into Merrill and other Wall Street banks.

Merrill last week agreed to make more complete disclosure of its potential conflicts of interest between its research and investment banking teams after Mr Spitzer's investigation of Merrill's internet research team uncovered e-mails in which Merrill analysts expressed disdain for the companies to which they had given top ratings.

Merrill has called the allegations baseless and said the e-mails were taken out of context.