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SEC To Draft New Disclosure Rules
By MARCY GORDON
AP Business Writer
WASHINGTON (AP) -- The proliferation of financial talking heads touting stocks on the airwaves has prompted federal regulators to consider requiring analysts who make stock recommendations to disclose whether they or their investment firm could profit from such advice.
Investors deserve to know about such potential conflicts of interest, the head of the Securities and Exchange Commission says.
``I think that television bestows a certain power and celebrity status on those who appear on it,'' SEC Chairman Arthur Levitt said in a telephone interview Friday.
He said investors need to know whether financial analysts, who can reach millions of households on TV, have ``compromised'' that power by holding significant positions in stocks they recommend.
SEC regulators plan to work with the National Association of Securities Dealers, which operates the Nasdaq Stock Market, and the New York Stock Exchange to draft new disclosure rules for financial analysts.
The rules would apply to analysts who recommend stocks in print or on television.
On Thursday, the NASD's Board of Governors approved a resolution supporting disclosure by analysts of potential conflicts of interest during public appearances.
``It is important for investors to have confidence that a recommendation made by an analyst or other financial services professional is based solely on the merits of the investment and not that person's financial interest,'' said Robert Glauber, the NASD's chief executive officer and president.
Levitt called the NASD's move ``an important and commendable step.''
CNBC, a major financial TV network, already requires analysts appearing on it to make such disclosures, said spokesman Paul Capelli.
Kathy Valentine, a spokeswoman for the Association for Investment Management and Research, which represents financial analysts and other investment professionals, said the group ``supports full disclosure of material information by the analyst community.''
It wasn't immediately clear, however, whether the analysts' group would support new federal rules.
Levitt, in a speech last April, said ``I think it's time investors are told -- in a meaningful way -- when the analyst's employer has a recent investment banking or advisory relationship with the company that is being recommended.'' |
