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Stock exchange abandons controversial disclosure rule

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Stock exchange abandons controversial disclosure rule

  • The New York Stock Exchange’s rule would have required stock analysts to stop talking to reporters who did not publish the analysts’ disclosures on conflicts of interest.

April 4, 2003 — The New York Stock Exchange announced yesterday that it has dropped a controversial disclosure rule that would have forced analysts to stop talking to journalists who did not report stock analysts’ disclosed conflicts of interests in news articles.

News organizations had protested to the exchange that the rule effectively forced them ignore their own editorial judgement and publish information, or immediately lose all access to valuable financial news sources.

Edward Kwalwasser, a vice president with the exchange, reportedly said at a press conference that officials worried that because the rule was implemented in response to a federal law, it would be seen as an indirect form of censorship by the exchange. But officials stood by their position that since the NYSE is not a government agency, it could not directly violate the First Amendment, even when it dictated to whom analysts could and could not speak.

The revised rule still requires full disclosure by analysts of potential conflicts of interest when they are interviewed by members of the news media, but does not require them to stop talking to news media who do not fully report the disclosures.

“We listened to what the media said,” Kwalwasser said at the press conference.

A similar proposal made by regulators of the NASDAQ market was dropped earlier amid similar criticism.

NYSE officials also told Dow Jones Business News that they would meet today with Al Jazeera representatives “to talk about a possible return to the exchange.” The Arab television network had its news credentials revoked by the exchanged over what officials felt was inappropriate reporting on prisoners and victims in the war with Iraq.

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

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