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| 2003
News and Press Releases |
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HEADLINE ARCHIVED:
ANALYSTS MUST VOUCH FOR REPORTS -- NEW SEC RULE BRINGS PERSONAL VIEWS TO FORE
By: Anitha Reddy
Washington Post. Feburary 7, 2003
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EXCERPT:
Stock research analysts now have to certify that opinions expressed in their reports accurately reflect their personal views, the Securities and Exchange Commission decided yesterday. The SEC also ruled that analysts must disclose whether their compensation is dependent upon any specific positive or negative judgment about a company. The rules are similar in spirit to one the agency approved last summer that requires chief executives and chief financial officers to personally attest to the accuracy of corporate financial statements. Even with certification, analysts will remain subject to anti-fraud laws, said Annette Nazareth, director of the SEC's market regulation division. But the new requirement "calls for a reflective moment" by analysts. Commissioner Harvey J. Goldschmid criticized the requirement as being only a "marginal gain" in eliminating analyst conflicts of interests and warned investors not to view certification as a seal of quality on research reports. But he said that he had still decided to vote for the requirement. The regulation does not forbid the linking of analysts' pay or other benefits to their stock evaluations. But it does order analysts to disclose the source, amount and reason for the compensation and to explain why those things might compromise the integrity of their recommendations. Analysts would also have to certify that any public comments they make correspond to their personal beliefs about a company's prospects. During the technology boom, equity analysts became minor celebrities, hawking their investment views as frequent guests on 24-hour news channels. William H. Donaldson, the nominee to replace Harvey L. Pitt as the agency's chairman, is expected to be confirmed by the Senate as early as next week. Yesterday's meeting was probably the last public session over which Pitt will preside. Both items on the agenda, including one allowing banks to engage in certain transactions without being registered as brokers or dealers, were passed quickly and unanimously.
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