“Days after agreeing to a sweeping settlement aimed at overhauling the way Wall Street does business, Bear Stearns Cos. reverted to the practice of using an analyst to promote a new stock offering,” writes Ann Davis in today’s Wall Street Journal.

“When questions about the episode were raised by The Wall Street Journal, Bear Stearns took the embarrassing step of delaying the initial public offering of stock in credit-card-processing firm iPayment Inc., and the securities firm said it would bar the analyst from covering iPayment. Bear Stearns also called the Securities and Exchange Commission and the New York Attorney General’s office to tell them about the incident and apologize.”

“Those two agencies were the principal architects of a deal announced two weeks ago with 10 big Wall Street firms, including Bear Stearns, in which they collectively agreed to pay $1.4 billion to regulators and vowed to revamp their businesses to eliminate conflicts of interest between research analysts and investment bankers. One key stricture: The firms would prohibit analysts from touting, at IPO roadshows, the companies that the investment bankers were being paid to take public. Bear Stearns paid $80 million as part of the pact, without admitting or denying wrongdoing.”

“The appearance in a promotional Webcast of the Bear Stearns analyst, senior managing director James Kissane, is sure to reinforce regulatory concern that Wall Street firms aren’t sufficiently contrite in light of the recent research disclosures and settlement.”

“Already, two Wall Street chief executive officers have angered regulators by appearing to play down in public comments the significance of the regulatory crackdown. The appearance of the Bear Stearns analyst is the first indication that employees in the trenches also don’t appear to have digested the seriousness of regulatory concern over such conflicts.”

“‘ It’s just astonishing to me that a firm could allow an analyst to participate in a roadshow — and the fact that the prohibition on such conduct isn’t literally in effect yet doesn’t make me any less disappointed,’ SEC enforcement chief Stephen Cutler said in a statement. The settlement’s provisions take effect 60 days after the pact is entered into court files, something that hasn’t happened yet, which means that Bear Stearns technically wasn’t in violation of the agreement.”

“In a statement, Bear Stearns spokeswoman Elizabeth Ventura said: ‘We fully support both the letter and more importantly the spirit of the recent settlement agreement. We deeply regret that this unfortunate incident occurred. Once the problem was identified, we took immediate action to rectify the situation and are taking precautions to ensure that it will not occur again.’ “

“Letting stock-research analysts participate in company- or investment-banking-sponsored roadshows is expressly forbidden under the regulatory pact the 10 securities firms announced with regulators April 28. Documents released in the settlement revealed how firms had routinely used analysts as de facto marketers, having them cite bullish views on IPO candidates during ‘pitches’ to win lucrative underwriting business, and later having them deliver glowing forecasts in roadshow presentations to investors before the offering.”

“Virtually before the ink was dry on the settlement, Bear Stearns salespeople on May 2 e-mailed institutional investors a link to a prerecorded ‘net roadshow’ for iPayment, one of the few stock issues planned by Wall Street in two months amid the worst IPO famine in the U.S. in recent years.”