“As the controversy swirls over Martha Stewart’s trades of ImClone Systems Inc., the brokerage firm in the middle of the mess seems to have done many things right,” writes Charles Gasparino in today’s Wall Street Journal.

“Merrill Lynch & Co. prevented ImClone’s former Chief Executive Samuel Waksal from selling his stock before the biotechnology concern announced damaging news that crushed its shares. Mr. Waksal — a close friend of Ms. Stewart who shared the same Merrill broker — ultimately tried to sell his shares elsewhere and since has been arrested and charged with insider trading.”

“Later, as allegations of possible insider-trading spread, Merrill’s legal staff prodded a key player in the matter, a sales assistant, to provide new information that cast doubt on Ms. Stewart’s assertion that she had sold the stock because of a previously arranged agreement with her broker to unload shares. Merrill then put Ms. Stewart’s broker, Peter Bacanovic, and the assistant, Douglas Faneuil, on paid administrative leave, citing ‘factual issues regarding a client transaction.’ “

“But will all this be enough?”

“That’s a question some legal analysts are grappling with as they continue to study the circumstances surrounding the suspicious trading of ImClone stock in December just before the company announced on Dec. 28 that the Food and Drug Administration wouldn’t review its anticancer drug, sending shares of the company into a tailspin. Even though Merrill prevented Mr. Waksal from selling his shares, others were given a free pass to sell their stock before the announcement, including Ms. Stewart and Mr. Waksal’s daughter Aliza. Both are now being scrutinized as part of the government’s wide-ranging inquiry.”

“Officials at Merrill and others assert that the nation’s largest securities firm has done everything by the book. ‘We have worked closely with the authorities to help them uncover all the facts and enforce securities laws,’ a spokesman said. Even officials from a key congressional committee investigating the ImClone-trading controversy are complimentary of Merrill’s work.”

” ‘We are satisfied — Merrill has been very cooperative with the committee so far, and the focus of the committee continues to be ImClone,’ says Ken Johnson, a spokesman for the House Energy and Commerce Committee, which is examining the matter.”

“Congressional investigators also are going after the Food and Drug Administration to explain policies that may have contributed to the mess.”

“But with unprecedented attention focused on Wall Street’s frequent inability to detect and uncover fraud, Merrill’s compliance procedures could be in for close scrutiny by securities regulators in coming weeks. The entire controversy surrounding the ImClone trades ‘will raise some questions about Merrill’s supervision of’ Mr. Bacanovic, the broker, says Jacob Zamansky, a New York securities lawyer.”

“Mr. Zamansky adds: ‘Some will say Merrill should have watched Bacanovic more closely and broke Martha’s and the daughter’s trades. But in the end, if Merrill can show it has the proper procedures in place and that they reasonably enforced them, the firm should be OK. So far nothing indicates a problem.’ “

“A spokeswoman for Ms. Stewart and a lawyer for Ms. Waksal had no comment. Mr. Waksal has denied the charges.”