by David Schepp BBC News Online North America Business Reporter

Members of the New York brokerage community are breathing a sigh of relief over Tuesday's settlement between state officials and investment bank Merrill Lynch.

Despite the uncertain outcome of the remedies proposed by Merrill, industry insiders view the deal as positive because the financial impact on the firm - and the industry - for now appears limited.

The fixes include separating analysts' pay from investment banking revenues, and a public apology.

However, the settlement allows Merrill to avoid an admission of guilt, which may make it far more difficult for disgruntled investors to prove that Merrill knew what it was doing in issuing conflicting stock advice.

The bank is facing up to two dozen lawsuits from investors who claim they lost money by following its investment advice.

Anticipating problems

Probe timeline

8 April - Judge orders Merrill Lynch to disclose conflicts of interest 17 April - Merrill begins talk with attorney general 25 April - SEC begins its own investigation 26 April - Merrill CEO apologises for disparaging e-mails 7 May - Shares of Merrill trade below $40, having slipped 25% since 8 April 21 May - Spitzer announces deal, calls for other brokerages to follow suit

Tuesday's deal between New York state attorney general Elliot Spitzer and Merrill Lynch is unlikely to bring these investors any relief.

The settlement makes no provisions for a restitution fund - something burned investors have been pushing for - to compensate investors who lost money in following Merrill's stock recommendations - including those from former star technology analyst Henry Blodget.

One attorney who represents those clients says the language in the agreement is too vague for it to lead to substantial long-term changes at Merrill or other brokerages.

It is still not clear, for example, if analysts will no longer be allowed to woo investment-banking business for their firms, says John Allen, who represents numerous clients in a case against Merrill.

"The analysts aren't going to be refrained from doing that basically until investment banking is separated by a wall that doesn't have any holes in it," he told BBC News Online.

Until that happens, Mr Allen says, "you're going to continue to have problems".

Falling fortunes

In addition to the public apology and the structural changes, Merrill is also required to pay a $100m fine, divided nearly equally between New York and the remaining US states.

The greater cost to Merrill and other investment banks, however, has been the damage the affair has done to the reputation of the brokerage business.

A drop in the share price of brokerage firms, reflecting a decline in mergers and initial public offerings since the onset of last year's recession, has also impacted the fortunes of the industry.

Merrill's stock has followed a volatile downward path since Mr Spitzer announced his office had concluded a 10-month investigation into the firm's practices last month.

It is not clear what changes await Wall Street

From a high of $56 in mid-March, shares in Merrill fell as low as $41 in early May as the company struggled to reach a settlement with the attorney general.

The share price slump has wiped about $10bn off Merrill's value.

On Tuesday, Merrill gained about 1% to end the day at $43.85, after climbing as high as $45.60 earlier in the day.

Future litigation

Despite the general relief expressed among much of Wall Street over the deal, the banking giant can expect to spend the next five years defending itself against civil litigation brought by investors.

They cling to the hope of recouping the billions they lost in heeding Merrill's advice to invest in volatile stocks its analysts disparaged in company e-mails, but touted publicly.

While the immediate impact on the banking industry as a whole is not clear, Mr Spitzer on Tuesday indicated he intends to vigorously pursue his investigations into other firms.

He said those firms should use Merrill's settlement as a "template" in order to make necessary changes to their research and investment banking businesses.

Mr Spitzer has declined to name which other firms his office is investigating, but several brokerages have indicated that they have received subpoenas from his office, including Morgan Stanley, Credit Suisse First Boston, Citigroup, Goldman Sachs and Salomon Smith Barney.

Goldman Sachs has said it will review how it pays its stock analysts, acknowledging that there are problems concerning the public's perception of Wall Street share-tippers.