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Thursday, 25 April, 2002, 21:24 GMT 22:24 UK
Wall Street analysts face probe
Wall Street sign
US stock market regulators have launched an investigation into possible conflicts of interest among Wall Street analysts.

The inquiry will be conducted by the Securities and Exchange Commission, the North American Securities Administrators Association, and a group of US states, the SEC said in a statement.

"The inquiry will help determine the necessity of additional rule-making and whether any laws have been violated," the regulator said.

The probe comes amid mounting concerns that supposedly independent Wall Street analysts may have issued overly optimistic assessments of companies involved in lucrative corporate financing deals with their employers.

Bias suspected

Earlier this month, New York state prosecutors ordered Wall Street giant Merrill Lynch to provide more information about possible conflicts of interest between its share research and investment banking operations.

SEC Chairman Harvey Pitt said on Thursday that the New York investigation "reinforced the commission's conclusion that further inquiry is warranted."

"We will give investors confidence that the same securities rules and protections apply no matter where they live or do business," he added.

Suspicions over possible bias in analysts' share buy recommendations peaked at the tail-end of the late 1990s technology boom, when stocks that had been enthusiastically tipped for months by Wall Street gurus began to collapse precipitatedly.

Small investors burned

Small investors - denied the priviledged access to Wall Street analysts enjoyed by big-league fund managers - suffered particularly heavy losses.

Investment banks have regularly been criticised for failing to properly separate their investment banking and research arms.

Critics claim that analysts - employed by banks to provide impartial stock advice to clients - come under pressure to back companies that are paying their employers for investment banking services.

Investor resentment over the issue is exacerbated by the fact that Wall Street analysts are among the best-paid and most high-profile figures in the US financial world.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Vicki Broadbent
"The investigation will be the biggest ever probe of Wall Street analysts over whether securities firms committed fraud."
The BBC's Steve Kingstone
"The potential conflict of interest was identified by New York's attorney general, Eliot Spitzer"
See also:

24 Jan 02 | Business
Merrill Lynch moves into loss
09 Jan 02 | Business
Merrill Lynch cuts 9,000 jobs
23 Oct 01 | Business
Merrill offers redundancy plan
16 Jul 01 | Business
Three Wall Street giants downgraded
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