|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
SEC Staff Backs 'Paid-For' Research: Recommendation Part Of Plan To Ease Small Biz Regulation
Staff Writer – Marketwatch
Securities Mosaic. December 8, 2005
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EXCERPT: A Securities and Exchange Commission advisory committee is recommending that the agency allow "paid-for" research to help boost smaller companies' access to capital markets. Research coverage of smaller companies in particular has declined "dramatically" in recent years as regulatory and market pressures have led to big reductions in the amount of money allocated to fund stock analysis, according to a copy of the advisory panel's recommendations obtained by MarketWatch. New business models have evolved in this environment to fill the void, but they rely on the companies being covered paying for the research themselves - so-called paid-for research. There's an inherent conflict of interest in this because if an analyst writes a negative report on a company, that firm could stop paying for the research. The threat of lost business could encourage analysts to write overly positive reports. However, new research organizations such as Shareholders Research Alliance and the Independent Research Network, a joint venture between Nasdaq and Reuters Group RTRSY, claim they've set up systems that address these potential conflicts. "These types of organizations should be permitted to supply research under SEC rules and settlement agreements," the Capital Formation Subcommittee of the SEC Advisory Committee on Smaller Public Companies, wrote. Signs have already emerged that the SEC is relaxing its stance on paid-for research. |
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