Wall Street Conflict Probe Expanded

The New York Attorney General's office is, as expected, now expanding its investigation into possible conflict of interest involving Wall Street analysts.

New York State Attorney General, Eliot Spitzer, originally focussed in on Merrill Lynch and claimed that there was a possible conflict between Wall Street analysts who rate stock and their investment banking collegues who work with the corporates or financial institutions being covered.

Spitzer has implied that analysts may be encouraged to give biased advice for fear that a proper rating would adversely effect a current or future investment banking relationship. As advisory fees for merger or acquisition work can run into several million dollars a time, Mr Spitzer's concerns are not unreasonable.

It is now believed that several other Wall Street firms will be subpoened to give evidence in the inquiry. People close to the investigation feel that Goldman Sachs, CSFB, Morgan Stanley, Lehman Brothers, Salomon Smith Barney, UBS, Bear Stearns and Lazard are likely to be called as the investigation proceeds.

There is no suggestion that any of the securities firms mentioned has actually done anything wrong, but Mr Spitzer is concerned that investors are provided with unbiased and accurate advice at all times.