Brokerages Are Urged to Provide Outside Research

Federal and state regulators told Wall Street firms they should fund independent securities research that would provide investors with stock analysis without conflicts of interest, people familiar with the matter said.

At the first meeting of regulators and Wall Street brokerage firms to discuss research reforms, New York Atty. Gen. Eliot Spitzer and Securities and Exchange Commission enforcement chief Stephen Cutler said securities houses should fund up to 20 independent companies that would give investors access to their research.

The regulators made the proposal Thursday at the meeting at the SEC in Washington. Regulators and companies, including Citigroup Inc.’s Salomon Smith Barney and Goldman Sachs Group Inc., are working to settle the year-old investigations.

“It would be a strong step forward. It’s better than doing nothing, but the investment banks’ research should also continue to be scrutinized,” said Duke University law professor James Cox.

Wall Street stock research has come under fire as misleading and biased in scandals in recent months, leading to calls for reform on how analysts and investment banks do business.