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New stock analyst rules could stifle press freedom

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    NMU         WASHINGTON, D.C.         Newsgathering         Nov 26, 2002    

New stock analyst rules could stifle press freedom

  • Proposed disclosure rules filed with the Securities and Exchange Commission by the New York Stock Exchange and the National Association of Securities Dealers would require analysts to stop giving interviews to news media outlets who do not publish analysts’ conflicts of interest.

Recently proposed requirements by the New York Stock Exchange and the National Association of Securities Dealers would effectively require journalists to disclose analysts’ stock ownership and company relationships whenever they are interviewed for news articles. If journalists don’t make such disclosures, analysts would be required to stop giving them interviews.

The newest proposal expands to print publications guidelines approved by the Securities and Exchange Commission in May requiring analysts to disclose their conflicts in public appearances, including broadcast interviews.

Under the proposed changes to the May guidelines, filed with the SEC in October, analysts would be expected to keep tabs on whether print publications make the required disclosures when quoting them by name.

“However, when an analyst of a member is aware that a particular media outlet has previously edited out the required disclosures, the SROs [self-regulatory organizations] expect that an analyst will decline subsequent appearances, absent assurances that the disclosures will not be edited out,” NYSE and NASD wrote in a joint memorandum regarding the original guidelines that applied to broadcast interviews.

And although the intent of the guidelines are to inform the public about potential influences on analysts, the guidelines go too far, say some media organizations.

According to a Nov. 22 statement from The New York Times, the newspaper “believes disclosure of analyst conflicts in news reports is necessary and we have endeavored to provide that in our coverage. It is not, however, in the public’s best interests to have the editorial discretion for disclosing or not disclosing conflicts placed in the hands of a governmental body. If the proposed rule becomes effective and brokerage firms use it as a pretext for not talking to reporters, the public will suffer. Denying reporters access to information raises serious constitutional issues.”

The NASD has indicated, however, that it is working on an amendment to its proposed guidelines that would address those concerns.

“We plan to make it clear that there is a need to make proper disclosures, but that it is up to journalists to decide whether to use it,” said Howard Schloss, senior vice president for corporate communications with NASD. “We won’t tell [the analysts] who they should and shouldn’t be talking to.”

Schloss said the amendment should be completed within the next couple of weeks.

The Securities and Exchange Commission will rule later on whether the proposed changes will be implemented.

(NASD Rule 2711, NYSE Rules 351 and 472) JL

© 2002 The Reporters Committee for Freedom of the Press

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