A key lawmaker said today that any fines paid by Wall Street firms to settle investigations into conflicts of interest should be used to reimburse investors who lost money in the stock market meltdown.

Rep. Richard H. Baker (R-La.), chairman of the House Financial Services subcommittee on capital markets, said he will introduce legislation next year requiring that states return all money generated through settlements or judgments against securities firms to the affected shareholders.

At present, most such fines at the state level are paid to the prosecuting agency. Baker noted that the corporate reform recently passed by Congress already requires that fines collected by the Securities and Exchange Commission be returned to investors.

Baker said he talked to SEC Chairman Harvey L. Pitt today and said Pitt strongly supported sending fines back to investors. The SEC had previously declined to comment on the matter.

Under Baker's proposal, affected investors would receive a share of any settlement or fine equal to the percentage of stock they own in the companies involved. The SEC would be in charge of distributing the funds, Baker said.

Some investor activists criticized New York Attorney General Eliot L. Spitzer earlier this year for not agreeing to distribute to investors a $100 million fine he levied against Merrill Lynch & Co. for allegedly issuing tainted stock research results. He said at the time that he supported the idea of restitution but that distributing the money would be too difficult. Now Spitzer advocates a restitution fund, according to sources familiar with his thinking.

"We consider the fact that [Spitzer] is supporting the restitution fund a tremendous step in the right direction," Baker said, adding that investors who were hurt by alleged abuses are the proper recipients of any fine payments.

"For probably the first time ever I want to compliment the attorney general," Baker said. The two have clashed in the past as Baker has accused Spitzer of usurping the federal government's traditional authority to regulate the securities markets.

Spitzer and other state regulators, along with the SEC and NASD, the securities industry's self-regulatory body, are negotiating with a dozen large securities firms in an effort to conclude several investigations that have produced embarrassing revelations about the way Wall Street works and dampened investor confidence.

Fines generated by the settlement could total $1 billion or more, regulatory sources say. Wall Street firms have largely accepted the fact that they will have to pay large fines to end the investigations. But regulators still expect some complaints as firms are told late this week and early next week the approximate size of their fines. Executives at several Wall Street firms have said in recent days that they would be more comfortable paying the fines if the money went to investors rather than to state or federal regulators.

Firms under the heaviest scrutiny, such as Credit Suisse First Boston Corp. and Citigroup Inc., are expected to go first in getting the estimates of their fines. Sources at Credit Suisse said the firm planned to meet formally with regulators Friday. But only informal talks are expected Friday between regulators and Citigroup.

Other firms under less direct pressure are to meet with regulators Monday and Tuesday, sources said. Fines for individual firms could reach as high as $400 million, sources said. But contrary to some reports, regulatory sources said the upcoming meetings with firms will be negotiation sessions. Firms will not be told the final amounts they will be expected to pay. A final "global" settlement is not expected until mid December at the earliest.

In addition to fines, the global settlement is likely to put strict limits on when analysts can interact with bankers. It is also expected to require that each firm hire an ombudsman to purchase independent research from at least three firms that do no investment banking work and to ensure that the research is distributed to retail brokerage clients.

One possible obstacle to reaching a global settlement could be deciding whether the findings of Spitzer's investigation are made public.

Spitzer has been aggressively investigating possible conflicts of interest at Citigroup's Salomon Smith Barney Inc. brokerage and investment banking unit, including allegations that Citigroup chief executive Sanford I. Weill may have improperly pressured an analyst to increase his rating on AT&T Corp. stock. A source close to Spitzer said that if Citigroup wants to be part of the global settlement, it will have to agree to allow Spitzer to release all of the findings of his investigation.

The Spitzer source noted that earlier this year Merrill Lynch tried to make the withholding of Spitzer's findings a condition of any settlement. Spitzer rejected Merrill's argument and later released his findings, offering the most vivid view to date of how a big Wall Street firm operated during the boom stock market years of the late 1990s.

Spitzer plans to do the same with his Citigroup findings, which include scores of subpoenaed e-mails and other documents as well as dozens of deposition transcripts. "We are committed to producing a record of this investigation," the Spitzer source said, adding that the material would add a great deal of material to e-mails that have already been leaked to news organizations.

A Citigroup spokeswoman declined to comment on whether the firm opposed the release of Spitzer's findings. An executive at another firm under regulatory scrutiny said that it would be deeply unfair to exact a large fine and "publicly humiliate" Citigroup.

Meanwhile, Morgan Stanley today angrily rejected complaints lodged by Citigroup and Credit Suisse that it was getting off easy in the global settlement talks because it had deleted damaging e-mails regarding the work of Mary Meeker, Morgan Stanley's star Internet analyst. An official at Morgan Stanley said the firm had produced 400,000 pages of documents, including 200,000 pages of e-mail.

"There is no outstanding request for e-mails," Morgan Stanley spokeswoman Diana Quintero said. "Morgan Stanley believes we have fully satisfied regulators as to our good-faith efforts to cooperate with every aspect of the investigations."

Officials at the SEC and in Spitzer's office said they were satisfied with Morgan Stanley's e-mail production.

Rep. Richard H. Baker (R-La.) vowed to introduce legislation on reimbursement of investors.