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Judge Wants More Data Before Approving Wall Street Deal
NEW YORK -- A federal judge said he needs more information before he can approve a $1.4 billion settlement between Wall Street investment firms and regulators over alleged research conflicts.

For the second time since the pact was submitted to him in April, U.S. District Judge William H. Pauley in Manhattan requested more details, such as whether new rules separating investment banking and research analysts apply to the firms' foreign affiliates.

In an eight-page order issued last week, the judge also wanted to know if any of the banks plan to seek tax deductions on the penalties, or submit payments to insurers for reimbursement.

A spokeswoman for Citigroup Inc.'s Smith Barney research unit, which has agreed to pay the largest penalty of $400 million, wasn't immediately available for comment. An SEC spokesman said the agency will respond to the judge's questions "in the appropriate time and in the appropriate way."

The judge gave the parties until July 18 to respond. He asked for a list of stocks and time periods during which investors must have owned them to qualify for a piece of the pact's $399 million restitution fund.

Judge Pauley wrote that he had additional questions "considering the fairness and reasonableness of the proposed consent judgments, and their subsequent enforcement." He didn't indicate major concerns that could potentially jeopardize the accord.

In April, 10 large securities firms agreed to settle allegations by the Securities and Exchange Commission (News - Websites) and other regulators that they issued overly bullish stock research in order to win lucrative investment-banking business. They settled the civil charges without admitting or denying wrongdoing.

Besides Citigroup, Bear Stearns & Co. , Credit Suisse First Boston Corp., Goldman Sachs Group Inc. (NYSE:GS - News) , J.P. Morgan Chase & Co. , Lehman Brothers Inc. (NYSE:LEH - News) , Merrill Lynch & Co. , Morgan Stanley , UBS Warburg (News - Websites) LLC and US Bancorp's Piper Jaffray unit agreed to the deal, as did former analysts Jack Grubman (News) and Henry Blodget.

Last month, the SEC answered the judge's initial questions, saying hundreds of thousands of eligible investors could get payments under the restitution fund. The SEC also said there would be no tax credits or deductions for any penalties paid by the firms