Judgment Approaches for Wall Street

The discussion of fines is the final stage in putting together a global settlement of the many different regulatory investigations into conflicts of interest between investment bankers and stock analysts.

After several weeks of debate, regulators and the Wall Street firms are said to be in agreement on a plan to require brokerages to provide their customers with access to research reports from at least three so-called independent research firms.

Fetters

Another aspect of the deal will be the enactment of a new regulation that will put additional curbs on contacts between investment bankers and analysts.

The various inquiries stem from concern that investment bankers at Wall Street firms, especially during the bull market, pushed stock analysts to slant their research on companies that were generating millions of dollars in investment banking fees.

The issue of tainted Wall Street research became front-page news earlier this year when Spitzer's office produced a series of damaging Merrill Lynch(MER Quote) internal emails that revealed that some Merrill analysts didn't believe the buy recommendations they were putting on Internet stocks. Merrill later agreed to settle that investigation by paying a $100 million fine and agreeing to changes in its research practices.

Since the Merrill investigation, more damaging information has come out about Wall Street's business practices. And the firm taking much of the heat the past few months has been Citigroup, with most of the attention focusing on the work of Jack Grubman, Salomon's former star telecom analyst.

Just last week, a series of embarrassing 2-year-old emails from Grubman to a friend at another financial institution were leaked to the news media. The emails purported to show that Citigroup Chairman and CEO Sanford Weill may have leaned on Grubman to change his rating on AT&T(T Quote) shares in 1999, as part of a bizarre quid pro quo to get Grubman's twins admitted to an elite New York nursery school.