Bank breaches Wall Street accord

Wall Street's commitment to reform in the wake of the settlement with regulators two weeks ago has been thrown into doubt by one of the banks that signed the deal, Bear Stearns.

It emerged yesterday that just days after agreeing to the $1.4bn (£869m) settlement of conflict of interest allegations, Bear Stearns used one of its senior analysts to promote a new share offer. The practice is expressly forbidden by the agreement, which aims to separate research from investment banking to prevent analysts being compromised.

The deal, signed by 10 Wall Street banks, alleged that analysts were misleading small investors by publishing overly optimistic research on clients with the aim of securing investment banking business.

Bear Stearns apologised for the incident and said it had informed the securities and exchange commission, the US financial watchdog, and the office of the New York attorney general, Eliot Spitzer, who led the campaign for reform.

The bank featured analyst James Kissane in a promotional webcast supporting the flotation of credit card processing firm iPayment. In the video, Mr Kissane talked about the firm in glowing terms. "I think iPayment represents a great way for investors to play a proven winning strategy," he said.

Bear Stearns emailed clients on May 2 with a link to the "virtual" roadshow.

The flotation of iPayment was delayed for a day after the Wall Street Journal yesterday disclosed the apparent conflict. A Bear Stearns spokeswoman said: "We fully support both the letter and the spirit of the recent settlement agreement. We deeply regret this unfortunate incident occurred." The bank said it was taking precautions to ensure there would be no repeat. Bear Stearns is to pay $80m for its share in the deal.