U.S. Business: Wall Street: A Long Look Upward

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> Research, which includes an elite staff of 210 analysts, whose far-ranging corporate sleuthing costs up to $9,000,000 a year. The analysts, including six in Canada and four in Europe, keep tabs on 3,600 companies both to guide individual customers and to orient Merrill Lynch's own underwriting. The firm also has a staff of 80 whose only duty is to analyze customer portfolios as a free service; last year, they scrutinized and made recommendations about 51,000 stockholdings.

> Commodities, centered at the Chicago Board of Trade, where Merrill Lynch is one of the biggest, and most cautious, brokers. It handles 7,000 commodities accounts. Because of the precarious nature of commodities trading, the company requires that each prospective customer fill out an extensive financial form before it will accept him. The rule of thumb, says a vice president is, "Does this guy have $10,000 he can afford to lose?"

> Underwriting, in which Merrill Lynch has come from a poor 60th position among investment bankers 20 years ago to third place in management of corporate underwritings. The firm underwrote $1.3 billion worth of corporate securities last year, this year has already scored a major coup by handling the negotiations in which Howard Hughes sold his stock in TWA. Merrill Lynch got the business partly because, in a specialized field where personal contacts count, it had long ago been the broker that Hughes's father used. It sold the stock at $86 a share, pleased Hughes by handing over a certified check for $546,549,771, got $2,900,000 as a manager's fee for handling the transaction.

The Rules. Whether it deals with an eccentric multimillionaire like Hughes or with a centric, ten-share customer in its Wilson, N.C., office, Merrill Lynch imposes upon itself a set of rules that goes far beyond the requirements of law or the ordinary ethics of Wall Street. As a privately held corporation, it need not make much public disclosure about its transactions; yet almost alone among Wall Street houses, it issues a candid annual report addressed "To Our Customers." Also standing solitary among the big brokers, Merrill Lynch so far has refused to deal with the mutual funds, thereby turning away at least $10 million a year in commissions. The reasoning: there might be an argument about who should be given the first chance to buy attractive stocks. Should it be the huge mutuals? Or should it be the firm's individual customers who have made its fortune?

Merrill Lynch also places extraordinary—for Wall Street—restrictions on its own employees. None is permitted to make a bank loan using securities as collateral. None is allowed to sell stocks short on his own account. "Significant debts" are grounds for firing. So is "high living." As a result, Merrill Lynch men are a notably ingrown group, spend many of their social hours with one another playing low-stakes bridge.

Just to make certain that all offices observe the rules, the company keeps inspector teams constantly on the move. Top executives often act as inspectors—as witness a time early this year when Thomson, then executive vice president, paid unannounced visits to the Tokyo and Hong Kong offices.