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. Last Updated: 07/27/2016

SEC Planning Wall Street Shake-Up?

NEW YORK -- The U.S. Securities and Exchange Commission is set to take the most drastic action yet to address rampant conflicts of interest on Wall Street, The Wall Street Journal reported Thursday.

In measures that will be disclosed soon, SEC chairman Harvey Pitt is expected to require for the first time that Wall Street research departments clearly be split from investment-banking operations, The Journal reported, citing people familiar with a proposal that is being formulated.

At the same time, the SEC is expected, through proposed rules and enforcement actions, to require Wall Street firms to formally separate their IPO-allocation businesses from their investment-banking departments, these people say, The Journal reported.

The SEC also is considering actions that would require corporate executives to disclose the initial public offerings of stock they receive from investment-banking firms to their own boards, people close to the chairman say, according to The Journal.

Talks about such an overhaul have already started between the SEC and major Wall Street firms, which have made overtures to the SEC indicating they are willing to agree to major changes as part of an industrywide settlement of the issues, The Journal reported. It is unclear how many firms would be part of the settlement, but chairman Pitt aims to make the accord one that would apply across Wall Street, according to The Journal.

Wall Street firms might consider divesting their research functions since that business is considered unprofitable and is supported largely through the investment-banking business, The Journal reported.

Pitt is considering a settlement that would set up a restitution fund for investors who lost money on stocks as a result of the Wall Street conflicts, The Journal reported.