Could the 'Buy, Sell and Hold' Be Outlawed?

Talking about a global settlement of Wall Street's regulatory woes is a lot easier than actually hammering one out.

Or, at least that's what regulators from the Securities and Exchange Commission, the National Association of Securities Dealers and the New York attorney general's office are finding out.

It now appears that a comprehensive plan for addressing Wall Street's unsavory business practices could be weeks away, a variety of sources say. One said, "Nothing is imminent."

New York Attorney General Eliot Spitzer and SEC Chairman Harvey Pitt, back on Oct. 3, had optimistically predicted that by the third week in October they would announce a comprehensive plan for dealing with the inherent conflict of interest in permitting Wall Street firms to serve as stock underwriters, stock analysts and stock sellers.

But the regulators are making slow progress on formulating a plan to prevent a firm's investment bankers from asserting undue pressure and influence on a firm's research analysts.

One of the things slowing the talks is that regulators, in an attempt to be sensitive to Wall Street's financial concerns, have been soliciting proposals and ideas from several big firms to gauge what kind of reforms they would be willing to accept. A number of firms were asked by regulators to send a model proposal outlining what kind of reform they would suggest for the industry.

Another obstacle is the insistence of certain states to push ahead with their own conflict-of-interest cases, even as regulators try to hammer out the comprehensives deal. Indeed, Massachusetts securities regulators are expected to soon file civil charges against Credit Suisse First Boston, in a case that will allege that the firm's analysts maintained high ratings on stock in order to appease CSFB's investment banking clients in the technology sector.

As for the global talks, some suggest the only way to do that is to force Wall Street firms like Citigroup(C Quote), Merrill Lynch(MER Quote), Goldman Sachs(GS Quote), Morgan Stanley(MWD Quote) and Credit Suisse First Boston to spin off their research divisions and let them operate as independent entities. The research arm of, say, Citigroup's Salomon Smith Barney essentially would then be forced to pay for itself by charging for its analyst's reports.

Others prefer a less draconian solution that would require securities firms to establish semiautonomous corporate subsidiaries for their research division. Under this plan, Wall Street firms could continue to operate their research arms, even if they lose money -- something many think will happen if an ironclad wall is erected between investment banking and stock research.

But other ideas for shaking up the way Wall Street does business also are being debated by regulators.

One proposal is for analysts to stop issuing price targets for stocks they cover and to stop placing buy, sell or hold recommendations on stocks. One of the criticisms of Wall Street research is that analysts maintain buy recommendations on stocks, even as they bury critical comments about a company in the text of a research report.