WASHINGTON - For alleged conflicts of interest between itsresearch and investment banking operations, Wachovia CapitalMarkets, LLC has been fined $25 million, the North AmericanSecurities Administrators Association said July 5. The settlementends a more than two-year, multistate investigation of WachoviaCapital Markets, which operates Wachovia Corporation'sinstitutional brokerage and capital markets businesses. Thesettlement, the allegations of which were neither admitted nordenied by Wachovia Capital Markets, included failure to superviseits employees in connection with potential conflicts of interestbetween equity research and investment banking as evidenced byresearch analysts' participation in certain presentations withpotential investment banking clients. In addition, researchanalysts' evaluations sought information regarding theirinteraction with investment banking and regarding the investmentbanking activity in their sector, NASAA said. Wachovia CapitalMarkets occasionally considered whether companies were potentialclients in determining to provide research coverage on thosecompanies. Wachovia also allegedly did not keep certain electroniccommunications as required by state securities laws. As a result,20% of the e-mail folders requested in November 2002 could not beproduced and 42% requested in January 2003 were not produced"promptly." Wachovia also failed to maintain a system that allowedit to locate and retrieve back-up tapes for its e-mail system,according to NASAA. Under the terms of the settlement, WachoviaCapital Markets will pay a total of $25 million, including: $20million in penalties for failing to supervise its employees inconnection with potential conflicts of interest between equityresearch and investment banking; $1.65 million in penalties forfailing to preserve required books and records; $3 million to beused for investor education, as designated by NASAA's board ofdirectors and $350,000 for costs associated with the investigation,which will be paid to NASAA. The settlement follows a 28-monthinvestigation of the firm led by state securities regulators fromNebraska, Virginia, and North Carolina, with assistance from Utahand Alabama, and contributions from Georgia, Maine, Connecticut,and New Jersey.