Pitt stop

Last month chairman Harvey Pitt met in New York with the CEOs of several big securities firms to discuss the ongoing controversy about conflicts of interest in their research departments. At Pitt's behest, the firms agreed to form a working group of senior research officials that in coming weeks will propose reforms designed to mitigate such conflicts as analysts owning shares of companies they cover and getting involved in their firms' investment banking work. Pitt appears to be playing the good cop, leaving the tough role to Representative Richard Baker, the Louisiana Republican who since June has led a series of congressional hearings in which he's excoriated Wall Street for poorly managing analysts' conflicts. The issue was knocked off lawmakers' front burner by the September 11 terrorist attacks but is heating up again: Baker is disappointed by the industry's piecemeal reforms and vows to sponsor legislation to fix the problem if Wall Street doesn't act. The Securities Industry Association issued voluntary guidelines for research departments on the eve of Baker's first hearing, but the congressman wants a set of binding, enforceable reforms, most likely geared toward improved disclosure of conflicts. "The idea is to figure out a way to give the SIA best practices some teeth," says one research director who will serve with the working group. Pitt, through an SEC spokesman, declined to comment.