Citigroup Proposes Rules Limiting Conflicts

Citigroup’s Salomon Smith Barney unit, which New York Atty. Gen. Eliot Spitzer is investigating for possible conflicts of interest in its stock research, proposed industrywide rules separating analysts from investment bankers.

In a letter Friday to industry regulators, Citigroup Chairman Sanford Weill suggested that analysts be prohibited from attending meetings with bankers soliciting business from public companies.

Analysts also shouldn’t be allowed to attend “roadshows,” presentations for potential investors in new stock offerings, Weill said.

The ideas go further than what other brokerages have proposed.

Citigroup may be trying to head off more severe regulation from Congress or Spitzer, said Alan Bromberg, a securities law professor at Southern Methodist University in Dallas. “It’s an effort to say the industry can solve the problems by itself,” he said. “They’re trying to say, ‘We’re good citizens.’ ”

Spitzer’s initial investigation into potential analyst conflicts of interest resulted in a $100-million settlement by Merrill Lynch & Co. in the spring. Spitzer has since turned his attention to Salomon and Morgan Stanley. His probe is based on allegations that analysts have tailored their public opinions of companies to win lucrative banking work for their firms.