By Marcy Gordon
The Associated Press

WASHINGTON - Skeptical senators questioned regulators Wednesday about whether a $1.4 billion settlement with 10 big investment banks would lead to real change on Wall Street or benefit ordinary investors, and if top brokerage executives would be held accountable.

Discouraged by what they see as a lack of contrition on the part of brokerage industry leaders, members of the Senate Banking Committee suggested that the new accord does not go far enough.

Regulators acknowledged that it will take time to determine how and to whom a $387.5 million fund being set up to compensate customers of the firms will be parceled out. Claims by people who believe they were cheated are expected to surpass that amount by far - sending some investors to seek redress through private litigation using the evidence from the regulators' probe.

"I believe that the Wall Street culture must change from the top down, and I am not convinced that the (settlement) has done enough to change attitudes at the top" of the big investment firms, Sen. Richard Shelby, R-Ala., the committee's chairman, said at a hearing called to examine the accord. "Without holding executives and CEOs personally accountable for the wrongdoing that occurred under their watch, I do not believe that Wall Street will change its ways or that investor confidence will be restored."

William Donaldson, chairman of the Securities and Exchange Commission, held open the possibility of future enforcement action against executives of Wall Street firms.

"Ongoing actions by the SEC will be directed toward supervisory" responsibilities of brokerage executives, Donaldson testified.

New York Attorney General Eliot Spitzer, who triggered the long-running probe of industrywide abuse, told the panel: "There are continuing investigations in my office and in other offices."

Pointing to the firms' executives, he asked, "Where were the legal and compliance departments? Where was the leadership at each (investment firm)?"

The regulators also found fraud at three of the firms: Merrill Lynch, the nation's largest brokerage, Credit Suisse First Boston and Salomon Smith Barney. Despite the alleged abuses coming to light, some Wall Street executives still don't seem to get it, said Sen. Paul Sarbanes of Maryland, the committee's senior Democrat.

"And yet we have this denial," Sarbanes declared.

In an unusual public rebuke, Donaldson last week chastised the head of Morgan Stanley, which is paying $125 million under the settlement, for suggesting that his firm's conduct didn't harm ordinary investors.

Under the settlement, the 10 firms agreed to neither admit nor deny the allegations that they deceived investors.

Shelby complained that the amount of fines being paid by Wall Street's biggest firms was "relatively small."

Salomon Smith Barney is paying the heaviest fine and restitution to investors under the settlement - $300 million. Its parent Citigroup recently reported net income of $4.1 billion for the first quarter.