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The Honolulu Advertiser
Posted on: Thursday, May 9, 2002

Averting conficts of interest

Associated Press

Highlights of rules, approved yesterday by federal regulators, that are designed to curb conflicts of interest among financial analysts. Some take effect immediately; others will be phased in during the next six months:

• Analysts must clearly disclose, in research reports and television and radio interviews, if they own shares in companies they are recommending. Investment firms also must disclose their stock holdings.

• Firms are barred from tying their analysts' compensation to related investment-banking business.

If an analyst's compensation is based on a firm's general revenues from investment banking, that must be disclosed in stock research reports.

• Analysts are prohibited from offering or threatening to withhold a favorable research rating or specific price target for a stock to lure investment-banking business from companies.

• Research analysts cannot be supervised by the investment banking department of a firm, and employees in the investment banking area are prohibited from discussing research reports with analysts before they are issued.