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July 31, 2001

Levitt on Analysts' Self-Interest

By Gregory Bresiger

The conflict between analysts and investment banking is likely to continue despite the securities industry's new efforts to police itself.

That was the prediction of Arthur Levitt, who has just begun making public comments since leaving the post of Securities and Exchange Commission Chairman.

"It's built into the investment banking culture. To take it out would be very difficult," Levitt said. The securities industry is looking at the possibility of requiring analysts to disclose what companies they hold.

But Levitt, while supportive of stronger disclosure standards, said it will not solve the problem of analysts whose work is tainted by self-interest.

"There should be total separation of analysts and investment banking. Unless that happens, you're stuck with the same old circumstances," Levitt warned.