DEALS UNDONE

In the past year alone, new management at Vivendi Universal has begun to pull apart the media empire of former CEO Jean-Marie Messier; AT&T Corp., which became the world's biggest cable company under former CEO C. Michael Armstrong, returned to its roots as a telephone company; and the frenetically acquisitive Tyco International of ex-CEO L. Dennis Kozlowski spun out its biggest purchase, CIT Group.

Which brings us to 2002's Deals of the Year. Picking the most noteworthy doesn't take much work: On December 20, after months of haggling, ten major Wall Street firms agreed to pay a total of $1.435 billion to settle securities regulators' charges of abusive research practices. The fine will be used to fund some investor restitution, subsidize independent research and provide for investor education; it comes with promised reforms that portend the biggest change in the way the Street does business since 1975, when fixed commissions were abolished.

The settlement made one career, that of New York State Attorney General Eliot Spitzer, who led the regulatory inquiry; destroyed another, that of former star analyst Jack Grubman, accused of publishing misleading reports; and saved a third, that of Citigroup CEO Sanford Weill, who will not be charged as a result of Spitzer's probe of Weill's alleged influence on Grubman's recommendations.

Will the deal accomplish what it set out to do -- protect individual investors and help restore the confidence that was lost when the stock market bubble popped in 2000? Details of the agreement in principle won't be known until later this month, so it's hard to pass preliminary judgment.

But one clear worry is that the results of this deal could, in time, provide retail investors with too much confidence. The last thing they need is false comfort about inherent market risks. For individuals, placing a pot of money in a particular stock remains a dangerous proposition, even if they have three "independent" research reports sitting on their night tables.

Cleaning up Wall Street's corrupted research model is a good, overdue objective. But a cleaner research process won't take the risk out of the market. Ironically, it might put more back in. In which case, we may see another deal that has to be undone.