Hearing on stock analysts planned next Thursday
WASHINGTON, June 5 (Reuters) - Congress plans to hold a hearing next Thursday on the supposed erosion of the barrier between stock analysts
and investment bankers, who may work under the same roof but have different interests, a committee spokesman said on Tuesday.
``I think we've got June 14'' as a tentative date for a hearing on analysts' independence, said
Michael DiResto, spokesman for Rep. Richard Baker, a Louisiana Republican who chairs the
House Financial Services subcommittee on capital markets.
Analysts are expected to be independent and offer objective views about a company. Investment bankers try to drum up business by
handling stock offerings and other services.
But some people, including Wall Street's top regulator, have questioned just how independent analysts can be if they are skittish
about issuing bad news about a company when their colleagues in the investment banking division are trying to make money off the
same firm.
``People have been debating whether there has been an erosion of the so-called Chinese wall,'' DiResto said, referring to the solid
separation that is supposed exist between the analysts and the investment bankers.
At the very least, the hearing is intended to shed light for the benefit of average investors. But it could go beyond the scope of a mere fact-finding mission. ``It may jump straight toward
exploring prospective remedies,'' DiResto said.
Any decision by U.S. lawmakers or the Securities and Exchange Commission to plug the holes in the barrier would be deferred until after the hearing. Congress or the SEC might present
a remedy proposal, or the the securities industry might step in with its own plan.
``I think the congressman would contemplate and leave it open for discussion if the industry can come up with something with real teeth,'' DiResto said.
At the hearing, Baker is expected to present academic studies that support concerns of an erosion of analysts' independence. A list of witnesses to testify before the House panel has not
been finalized.
The issue of analysts' independence was raised recently by Wall Street's top regulator, Acting SEC Chair Laura Unger, who has expressed concerned with what she described as holes in
the so-called ``Chinese wall.''
She has suggested that firms may be disinclined to release an unfavorable report if it might harm future business and has noted that less than 1 percent of analyst recommendations were
``sell'' or ``strong sell'' even when the Nasdaq stock market fell 60 percent last year. |
