SEC Chairman William Donaldson wondered in a May 8 speech whether the bond market has an analyst problem. Specifically, he raised the possibility of conflicts among fixed-income analysts at Wall Street firms similar in nature to the infamous late 1990s conflicts of their stock analyst brethren.

"There are still questions facing fixed-income research that are substantially the same as those that laid the groundwork for the Global Settlement," said Donaldson in remarks prepared for delivery to an analysts' group. The global settlement reached in late 2002 featured $1.4 billion in penalties imposed on a dozen big securities firms for stock analyst conflicts.

It ordered the separation of stock analysis from the influence of the firms' investment bankers, who too often saw positive analyses as a path to rich underwriting fees.

"For example, is it the case that fixed-income analysts are any less susceptible to pressure from their colleagues in investment banking, from the debt syndicate desk, or from corporate clients themselves?" Donaldson recently asked.

He gave no specific examples of conflicts involving bond analysts and he recommended no additional regulation from the SEC.

The SEC chairman's overriding issue with research is its short-term nature, which supposedly helps lead company managers to make poor trade-offs as they aim to hit short-term earnings goals.

It is a subject he has visited before and an area where he has some long-standing expertise. Forty-plus years ago, the SEC chairman was a co-founder of Donaldson, Lufkin & Jenrette, a securities firm that specialized in research.

"My colleagues and I set out to analyze (companies) in a comprehensive manner, akin to the work usually associated with the management consulting profession," Donaldson said.

Now, Donaldson is exhorting stock analysts to help lead investors to the promised land of the long term, where nary a thought is given to such issues as whether a company made its quarterly earnings-per-share target.

That might be a bit much to hang on analysts. Solid, honest work, even of short-term earnings trends, seems service enough.

-- Neal Lipschutz