Eliot Spitzer, the New York attorney-general, may opt for specific settlements for different Wall Street firms.
The new move will complicate efforts by some investment banks to reach a global settlement that would quickly put behind them a wave of investigations into conflicts of interest between their research analysts and investment bankers.
Mr Spitzer said he was considering the idea that securities firms were sufficiently different from one another that a uniform settlement might be unsuitable.
“It’s not a case that there can be only one solution,” Mr Spitzer said. “There may not be a cookie cutter solution. Each firm is different.”
Mr Spitzer’s remarks came as Citigroup, the largest financial services company, has begun talks with federal regulators on a possible deal to end their probes into conflicts of interest among the equity analysts at its Salomon Smith Barney investment banking unit. One idea proposed by Citigroup is a pledge to separate its research activities from investment banking. The regulators, including the Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange, were understood to be considering a Citigroup settlement as a possible blueprint for reform for the rest of the industry.
Other firms under investigation, including Credit Suisse First Boston, have been amenable to such a deal as a quick way to end their legal problems. But comments from Mr Spitzer, who is also investigating Salomon and CSFB, suggest that such a far-reaching deal might be difficult to achieve. Mr Spitzer would not say what specific remedies he favours to cure the conflicts of interest on Wall Street.
Rival bankers have complained that the separation proposed by Citigroup would put them at a competitive disadvantage. Citigroup, the world’s largest financial services company, could afford to subsidise a separate research division, they say, while smaller firms would struggle.
“This is going to play right into the hands of the big firms, who can afford to hold onto their analysts,” one banker said. “The unintended consequences have not really been explored.”
The investigations have tarnished their reputations and knocked billions of dollars from their market capitalisations.
Mr Spitzer reached a deal with Merrill Lynch in May that included a $100m fine and new measures to repair the firewall between its analysts and investment bankers. The most prominent were designed to separate analysts’ compensation from their contributions to banking.
The reforms, which Mr Spitzer held up as a standard for Wall Street, have been adopted by a group of large investment banks who were hoping to appease the attorney general before he turned his attention to them.
The momentum behind a global settlement for the industry could also be undone by members of the securities industry.