New York attorney general Elliot Spitzer, fresh from an inquiry into allegations that Wall Street brokerage Merrill Lynch issued misleading stock tips, may investigate Salomon Smith Barney next, according to press reports.

New York Attorney General Eliot Spitzer

Mr Spitzer is expected to decide whether or not to bring charges against Salomon Smith Barney early next month, the Observer newspaper reported.

Mr Spitzer is spearheading an investigation into Wall Street analysts, accused of issuing glowing reports on firms they privately disparaged so as to keep open the possibility of gaining lucrative investment banking business from them.

Many investors backed firms which later went bankrupt on the strength of the reports, racking up heavy losses.

Analyst under scutiny

Two months ago, Wall Street giant Merrill Lynch paid $100m to settle an investigation led by Mr Spitzer.

Any inquiry into Salomon Smith Barney is likely to focus on the activities of its star analyst Jack Grubman, who was closely associated with bankrupt telecoms giant Worldcom.

US regulators are already investigating upbeat research reports that Mr Grubman wrote on bankrupt US telecoms firm Winstar Communications.

Last week, a group of independent stock analysis firms formed the Investorside Research Association, which aims to provide investors with an alternative to stock research from Wall Street investment banks.