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“SEC Chairman William Donaldson has referenced this problem in recent public remarks,” said Ira Hammerman, SIA general counsel. “We agree with him that when issuers attempt to punish analysts for negative research reports they undermine the integrity of the research process, stifle the free flow of information, and hurt the markets and investors. We urge the SEC and the industry’s self-regulatory organizations to work together to address this serious issue.”
SIA noted that while most issuers do not engage in such conduct, others have been very aggressive in their efforts to retaliate against analysts whose coverage they consider too negative. “We understand that this retaliation has run the gamut from the subtle (refusing to take an analyst’s questions during a conference call, or denying an analyst the same access to senior management that is accorded to the analyst’s peers) to the blunt (threatening to withdraw management of an employee 401(k) account or other business from the analyst’s employer unless the analyst’s coverage becomes more positive. In some cases, we understand that analysts and their firms have been threatened with defamation litigation),” SIA wrote. The association called on the commission and the SROs to take steps to address the situation, and suggested strengthening listing standards as one possible solution.
In its comments on NYSE Rules 344 and 472, SIA expressed its support for the efforts of the NYSE and NASD to harmonize their rules on analysts, and suggested amending the NYSE’s definition of “research analyst” so that it coincides with that of the NASD. The comment letter is available at http://www.sia.com/2005_comment_letters/6374.pdf
