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Non-Tech : Auric Goldfinger's Short List -- Ignore unavailable to you. Want to Upgrade?

To: xcr600 who wrote (9814)	5/8/2002 5:23:16 PM
From: StockDung	Respond to of 19428

SEC approves new rules for besieged stock analysts By Kevin Drawbaugh WASHINGTON, May 8 (Reuters) - U.S. financial regulators on Wednesday approved new rules to force stock analysts to reveal more about their ties to companies they research, in an effort to stop them touting shares they don't really believe in. The U.S. Securities and Exchange Commission unanimously approved the measures with an eye to curbing abuses -- like those at Merrill Lynch where Internet analysts publicly touted stocks they had slammed privately as "junk." "This is an important first step. I hope it works and if it doesn't, we'll have other steps," said SEC Commissioner Cynthia Glassman at an SEC public meeting. The rules, originating on Wall Street and called inadequate by some investor advocates, would limit when and how analysts can issue opinions on stocks, restrict their personal investing activities and force banks to disclose more about their ties to companies they research and those of their analysts. New disclosures to be required in research reports would include charts showing how stocks have performed relative to the recommendations of analysts and figures showing what portion of a bank's total recommendations are buys, sells or holds. The stock exchanges will phase in the measures over six months, said New York Stock Exchange spokesman Ed Kwalwasser. The rules were developed over many months by the New York Stock Exchange, the Nasdaq-regulating National Association of Securities Dealers, the SEC and Republicans in Congress. The SEC on April 25 launched a formal investigation of analysts and whether they have misled investors. The probe could produce further reform proposals, officials said. "It's a dramatic change and I just think that as we see how they work out, there could be some new changes and interpretations," SEC Commissioner Isaac Hunt said. Amid a broad crisis of market confidence triggered by the Dec. 2 bankruptcy of former energy trading giant Enron Corp., controversy has grown over the role of stock analysts at the world's top investment banks. CONFLICTS LONG RECOGNIZED Experienced Wall Streeters have long winked at the dual roles of sell-side analysts. While portrayed as objective market researchers, they also serve the marketing and investment banking interests of their powerful employers. Such conflicts were tolerated until early 2000, when America slid into its first major bear market since stock ownership exploded among the middle classes in the 1990s. New York State Attorney General Eliot Spitzer last month ripped the lid off the problem. In an investigation he led, Merrill analysts were shown to have privately disparaged shares in Internet firms that they had publicly recommended. Rep. Richard Baker, a Louisiana Republican instrumental in helping develop the rules, said in an interview there was no need for new laws to cover egregious misbehavior by analysts. "That's actionable under the fraud statutes," he said. Democrats blasted the new analyst rules as insufficient. "These rules take an important first step, but do not go nearly far enough to limit the ties between analysts and their firms' investment banking departments," said New York Democratic Rep. John LaFalce in a statement. Baker responded that the rules were more than a fig leaf for the financial industry and GOP supporters. "This was not just a glossing over of a significant problem to protect political friends," said Baker. The new stock exchange rules would: --Prohibit pegging analysts' pay to specific investment banking deals and require disclosure if analysts' pay is pegged to investment banking revenues in general; --Ban offering favorable research for banking business; --Ban analysts from issuing research reports 40 days after the IPO of a company handled by that analyst's bank; or 10 days after a secondary offering "for an inactively traded company." --Restrict, but not ban, collaboration on research reports between analysts and investment banking employees; --Limit pre-publication review of analysts' research reports by the companies written about; --Require more disclosure of analysts' pay and personal holdings, the bank's holdings and its client relationships; --Restrict analysts from dealing in initial public offering shares in sectors they cover, except in diversified funds; --Require "blackout periods" prohibiting analysts from trading in shares of companies they follow for 30 days before and 5 days after issuing a research report about the company. --Prohibit analysts from trading against their most recent recommendations. --Require banks to clearly explain their stock rating systems and disclose historic data about ratings assigned. 05/08/02 16:11 ET