South Carolina will get a record $4.79 million as its part of a settlement with nine Wall Street investment firms over improper practices, Attorney General Henry McMaster said Thursday.

Most of the money — $4.5 million — is destined for the state’s general fund. The rest goes to consumer education and hiring more securities fraud investigators.

The securities settlement and fines are the largest in state history, McMaster said.

The deal is part of a roughly $1.4 billion global settlement agreed to last year by the Securities and Exchange Commission, New York Stock Exchange, National Association of Securities Dealers, most states and 10 of the nation’s top investment firms, accused of influencing securities research at brokerage firms.

One of the firms, Merrill Lynch, settled with South Carolina in 2002, paying a $668,376 fine. It was the Merrill Lynch investigation, started by McMaster’s counterpart in New York state, Attorney General Eliot Spitzer, that led to the global settlement.

McMaster took his time signing off on the state’s settlement with the remaining firms because he was weighing the benefits of accepting a payment now or prosecuting the cases independently, said Trey Walker, a spokesman for the attorney general.

“South Carolinians must be able to invest their money without fear of being misled or deceived by investment professionals,” McMaster said in a statement.

Unexpected windfalls to the general fund cannot be ear-marked for specific purposes. That means the money from the lawsuit settlement will sit in the fund until the Legislature decides how to spend it, which likely won’t happen until 2005.

If the state faces a budget shortfall before then, the settlement money could go to help balance the state’s books. Otherwise, it will be excess revenue to be spent at the lawmakers’ will next year.

Aside from the $4.5 million, $340,043 is being paid into the Investor Protection Trust, which funds programs that educate investors about investing’s potential payoffs and pitfalls.

Some programs are also designed to help investors spot swindlers and investment scams.

It was unscrupulous practices, undertaken by some of Wall Street’s largest firms, that led to the settlement.

Some investment firm analysts, who were supposed to offer independent opinions on stocks, were really just trying to push clients’ stocks.

For example, “buy” or “hold” recommendations would be given for a company while internal memos indicated that same company was really a “dog” or “loser.”

“Investors would not have been able to sniff out these dogs,” Walker said.

That’s why McMaster plans to use the $230,000 earmarked for his office to hire more attorneys, investigators and forensic auditors. These are the people who find evidence used to secure indictments that act as a deterrent to securities fraud.

“Jail time has the largest positive impact on investor confidence,” Walker said.

Currently, nobody convicted of state securities crimes is serving jail time.

The criminal trial of Larry Owen, former president of Carolina Investors, and the first of three former officers charged with investment fraud, begins July 19 in Greenville.

In early 2003, Carolina Investors and its parent company, sub-prime lender HomeGold Financial Inc., filed for bankruptcy. More than 8,000 South Carolina investors lost more than $277 million when the company failed.

Staff writer Aaron Gould Sheinin contributed to this article. Reach Werner at (803) 771-8509 or bwerner@thestate.com.