Salomon to Separate Analysts Pay - TheStreet

Citigroup

(C) - Get Report

, which employs the man many consider the poster child for analyst excess on Wall Street at its Salomon Smith Barney unit, has wasted little time following

Merrill Lynch

(MER)

down the path of contrition.

A day after Merrill settled charges of giving misleading stock analysis to investors, Salomon decided to change the way it compensates its research department.

As part of his widening investigation, New York Attorney General Eliot Spitzer issued a subpoena to Salomon in late April, requesting documents related to onetime star telecom analyst Jack Grubman's research. Grubman has been held up repeatedly as embodying the blurred lines between investment banking and research, reportedly ringing up multimillion dollar paydays for his work luring clients to Salomon's corporate finance department.

In an internal memo on Wednesday, Salomon praised Merrill's "landmark settlement," in which it paid out $100 million and agreed to separate analyst compensation from investment banking.

"The reforms embodied in the settlement set a new industry standard necessary to maintain investor confidence and provide a useful template," said Mike Carpenter, chief executive of Salomon Smith Barney, in the memo. "I am pleased to announce that we are embracing that standard."

As a result, Salomon will "separate completely" the evaluation and compensation of equity research analysts from investment banking, "consistent with the guidance in the agreement." In addition, the bank is forming a "robust" research committee, along the lines described in the settlement.