Analysis
By David Schepp BBC News Online North America business reporter

Friday's historic settlement between investment bankers, and state and federal regulators has been touted by officials as the best way for small investors to gain equal footing in US stock markets.

The agreement came about after weeks of negotiations between the brokerages, and the Securities and Exchange Commission (SEC), NASD, the New York state attorney general's office and others, resulting in penalties and payments totalling $1.4bn.

The question remains, however, whether individual investors, who New York state Attorney General Eliot Spitzer called "Joe and Jane Smith" in announcing the agreement, will see any money from the deal.

They lost billions of dollars acting on the investment advice of analysts whose allegiances, it is alleged, were swayed more by highly profitable investment-banking deals than unbiased stock research.

Investors left in the cold

Of the total, the largest amount, $900m, is earmarked for a "retrospective relief" fund, to pay the fines levied by the state and federal institutions involved in the settlement.

But in detailing the agreement, Mr Spitzer noted it would be difficult to predict whether individual investors would see any reimbursement of their losses from that amount.

"Again, investors get left with nothing," says John Lawrence Allen, a securities-litigation attorney who represents defrauded investors and author of "Investor Beware".

Mr Spitzer says the pact is a boon for small investors

"The settlement's doing nothing for investors. The settlement's helping the regulators fund their budgets," Mr Allen told BBC News Online.

Of the $1.4bn total assessed against the 10 investment banks named in the settlement, no amounts have been set aside to recompense investors who lost money on investments they made based on analyst research, he says.

'Deep slumber'

In addition, some analysts are critical of the role federal regulatory agencies failed to play in unearthing conflicts of interest.

It was known for years that conflicts of interest existed among Wall Street's investment banks, says Houston-based securities attorney Christopher Bebel.

Regulators, including the SEC, NASD and the New York Stock Exchange were in a "deep slumber" over the problem, he says.

"Nobody was taking any action to address the problems, which could have easily be ascertained through a thorough investigation at an earlier point in time."

It is for that reason, he says, investors are indebted to Mr Spitzer for spearheading the investigation into analyst research even as federal regulators continued to look away.

Class-action suits

Still, the historic agreement may do little to soothe investor jitters.

"It is a constructive settlement," says law professor John Coffee from Columbia University.

"But no one can tell you it is going to restore investor confidence."

After the stock-market crash of 1929, it took investors about 25 years to come back into the market, he says.

"Here, I think what investors have learned is that they cannot believe or trust one analyst as their guru," Mr Coffee says, adding that investors should regard analysts in the same vein as car salesmen.

In addition, Mr Coffee and other analysts warn Wall Street should brace itself for a brunt of class-action lawsuits.

Plaintiff attorneys, drooling at the prospect of leading multi-billion-dollar lawsuits, will soon begin the process of trying to get their hands on the evidence Mr Spitzer and federal regulators used to achieve Friday's agreement.

In other words, what seems to many like an end may actually be just a beginning.