New rules to avoid city conflicts

INVESTMENT bankers who bump into analyst colleagues at the local wine bar will be forced to make a quick exit and immediately report their meeting to their in-house regulators under new City rules that come into force this week.

These stipulate that to avoid conflicts of interest, analysts' reports and recommendations are completely independent of, and are not designed to promote, an investment bank's trading position.

Leading American investment banks, which were fined by New York District Attorney Elliot Spitzer for releasing biased analysis, are taking the new rules seriously. Phone systems have been altered to prevent investment bankers calling analysts and any e-mail communication must go through a bank's compliance office.

One leading bank even held a fire drill when analysts had to exit using a separate staircase from colleagues and were instructed not to communicate at all when they convened outside.

One banker said: 'It is a bit of a nightmare. Floors are being reconfigured to prevent any contact and we're not allowed to talk if we meet in the street.

'We're wondering what happens to colleagues who live in the same road, or whose children are in the same class.'

Some banks are trying to get round the new rules, which come into force on July 1, by calling analysts' work 'connected research' to indicate that some discussions may have taken place. 'I'm sure that loophole will soon be closed,' said one banker.