GOP lawmaker slams NY attorney general on analysts
(Adds Johnson, Sheehan, SEC comments, committee hearing)
By Kevin Drawbaugh
WASHINGTON, April 30 (Reuters) - A Republican lawmaker on Tuesday accused New York's Democratic attorney general of over-reaching in a high-profile assault on Wall Street stock analysts and urged swift action by federal regulators.
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As post-Enron efforts to reform the U.S. financial system became further politicized along party lines, Rep. Richard Baker said, "I am disappointed by reports that the NYAG ... seeks to achieve blanket rulemaking and policy changes that would impact the entire national securities markets."
In a letter to Securities and Exchange Commission Chairman Harvey Pitt, Baker wrote he had "grave concerns" about New York Attorney General Eliot Spitzer's actions, suggesting they could lead to the courts setting rules for equity analysts.
The Louisiana legislator urged the SEC to approve at a May 8 open meeting new analyst rules under development for months with the cooperation of America's largest stock exchanges.
"Because of the need for uniformity in our national securities markets, it is essential that the SEC now lead the concluding phase of this inquiry," Baker said.
Separately, a spokesman for Rep. Billy Tauzin said the House of Representatives Energy and Commerce Committee was drafting a bill to reform the Financial Accounting Standards Board, much maligned since Enron Corp.'s (Other OTC:ENRNQ.PK - news) collapse.
"We're close to an agreement on a FASB-related bill," said Ken Johnson, spokesman for Tauzin, a Louisiana Republican.
Laura Sheehan, spokeswoman for Michigan Rep. John Dingell, ranking Democrat on the committee, said, "We hope to have language finalized for introduction by the end of this week."
The bill proposes a new funding scheme for FASB, which now raises money by selling publications and seeking aid from accounting firms and companies, many of which have a vested interest in swaying the board's standard-setting decisions.
FASB has come in for criticism since the downfall of Enron, accused of using questionable accounting techniques to deceive investors, allegedly with the complicity not only of its auditor Andersen, but also of Wall Street stock analysts.
SPITZER UNMASKS TOUTS
The hard-charging Spitzer has pursued the analyst community with vigor, revealing recently that some of them privately disparaged Internet stocks while touting them as investments during the tech/telecom stock bubble of the late 1990s.
Seizing the spotlight in the scandal-charged post-Enron atmosphere on Wall Street, Spitzer has focused his attack on banking giant Merrill Lynch and Co. (NYSE:MER - news), but has subpoenaed other banks as well.
Merrill has called Spitzer's allegations baseless and said the e-mails were taken out of context. The firm has agreed to eventually disclose potential research conflicts, but is still negotiating for a complete settlement with Spitzer.
In a televised interview on Monday, Spitzer said he would not put off bringing possible formal charges against Merrill or other firms until the SEC weighs in on the matter. "I will not concede to them the capacity to veto what we do. New York is a separate sovereign," he said.
An SEC spokeswoman declined to comment.
After a series of congressional hearings last year, the New York Stock Exchange and the National Association of Securities Dealers proposed new rules for sell-side equity analysts.
Unveiled in February, the rules require more disclosure of potential conflicts of interest and restrict contacts between analysts and investment bankers. Some critics, including Spitzer, have called the rules inadequate.
Pitt -- top cop to the nation's securities markets and a Republican who once represented accounting firms and investment banks as a private lawyer -- last week said the SEC was launching a formal probe into analysts' behavior.
He met with Spitzer in Washington after the state attorney general appeared before the press on Capitol Hill with a line-up of Democratic lawmakers and union officials.
The U.S. Department of Justice has said it plans to examine allegations that analysts misled the public.
House Financial Services Capital Markets Subcommittee Chairman Baker has set a hearing for Wednesday morning on the credibility of corporate accounting. |
