SEC Probes Firing of Wachovia Analyst

The Associated Press
Wednesday, November 16, 2005; 2:19 PM

WASHINGTON -- The Securities and Exchange Commission is investigating if the firing of a Wachovia Corp. analyst was a retaliation for the analyst refusing to change his reports for investment bankers.

The investigation, which is in an early stage, could be the first test of regulations adopted in the wake of scandals involving stock analysts who issued upbeat reports to help win investment-banking business.

Under an SEC rule adopted in 2002 to combat conflicts of interest, analysts must certify whether their reports accurately reflect their views and specify if they are being paid to make a specific recommendation.

Former Wachovia analyst Arturo Cifuentes was fired in April after he refused to certify his pay wasn't geared to his recommendations.

Cifuentes, who specialized in collateralized debt obligations, did not respond to a request for comment, but his attorney, Jenice Malecki, said Cifuentes testified to the SEC in October.

A separate suit alleging unfair termination filed by Cifuentes earlier this year with the Labor Department suggests that bankers repeatedly attempted to influence his reports in order to sell Wachovia products and services.

"The certification requirements were used as an excuse to terminate an employee who was reporting serious pressures that he fought off regularly," said Malecki.

An SEC spokesman declined to comment.

Wachovia spokeswoman Christy Phillips said the company doesn't comment on current or former employees. She forwarded a statement saying that the Charlotte, N.C., bank "is committed to effectively managing research analyst conflicts of interest" and that "given our policies and procedures, we believe any claims alleging that our fixed-income research analysts are subject to improper influence are meritless."

Cifuentes was a fixed-income analyst, a group that wasn't covered under the landmark $1.4 billion settlement between regulators and 10 Wall Street banks over flawed research.

Under the settlement, firms were required to sever links only between equity research and investment banking. Wachovia allegedly took advantage of the discrepancy, telling Cifuentes later that in fixed-income research, the wall between banking and research was "softer," according to the complaint filed with the Labor Department.

Earlier this year, former SEC Chairman William Donaldson urged Wall Street to address conflicts in the area of fixed-income research.

More recently, SEC Chairman Christopher Cox has indicated that continuing signs of analyst retaliation are a concern.

© 2005 The Associated Press