Salomon Smith Barney (SSB) said Wednesday it would change the structure of its stock research department to match the changes agreed to this week by Merrill Lynch & Co. in a $100 million settlement with the State of New York (see Daily GPI, May 23). In a memorandum to the SSB staff, CEO Michael A. Carpenter said a research review committee would be formed to oversee analysts’ recommendations, and said SSB would separate “the evaluation and compensation of equity research analysts from investment banking.”

Carpenter, who said the changes would “enhance the quality and integrity of our equity research product,” added that Merrill Lynch had now set an industry standard that SSB would follow.

From the beginning, said New York Attorney General Eliot Spitzer, the state had wanted to structure a way to “protect analysts from the improper pressures applied upon them by either investment bankers or the clients outside the investment house.” He said SSB’s changes were an “affirmation” that the plan could work.

Spitzer wants all of the large Wall Street firms to revamp their research departments in a way like Merrill Lynch’s changes, but SSB is the first to announce it would mirror those changes. Earlier this week, Goldman Sachs appointed E. Gerald Corrigan to a position of investment research ombudsman to ensure the company’s research was objective.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.