The securities regulator, the NASD, said Phua Young had had an improper relationship with Tyco, based on exchanging expensive gifts.

NASD is cracking down on Wall Street firms that issue over-optimistic advice to investors, a practice which was widespread in the dotcom boom years of the late 1990s.

Tyco has faced a string of embarrassments since its chief executive Dennis Kozlowski stood down hours before being arrested for tax evasion in June 2002.

The firm has since admitted to inaccuracies in its own accounts; it is also suing ex-finance director Mark Swartz for alleged embezzlement.

'Rosy research'

The NASD brought five civil charges against Mr Young.

"The conduct of this analyst - as evidenced by his own e-mails, gifts to the CEO of Tyco, and favours he received from the company - amounted to a betrayal of objectivity and honesty in research," said NASD chairman Mary Schapiro.

Mr Young rejects the charges and is suing Merrill Lynch for $60m (�36.3m) compensation for wrongful dismissal, according to his lawyers.

If found guilty, he faces punishments ranging from a fine to lifelong suspension from working in the securities industry.

The NASD alleges Mr Young published rosy research that was calculated to boost Tyco's stock.

His published reports "contained misleading statements and exaggerated claims which were contrary to the beliefs, views and opinions he expressed privately."

Private investigator

The NASD said Mr Young accepted flights on Tyco's corporate jet and gave Mr Kozlowski a case of wine worth $4,500, far above the maximum $100 limit on gifts in NASD rules.

It alleges Tyco also hired a private investigator to prepare a report on an acquaintance of Mr Young's, at the analyst's request.

Barry Goldsmith, NASD director of enforcement, said the watchdog was determined to pursue individual wrongdoers as well as institutional problems like the ones that were the subject of a $1.4bn settlement with 10 Wall Street brokerages last month.

"Firms act through individuals, institutions act through individuals, and we think it's important to hold the individuals who violate the rules accountable," Mr Goldsmith told BBC World Service Radio.