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SEC addresses conflict of research issues

A series of research analysis rules have been approved by the SEC to enhance the independence and objectivity of corporate research.


The rules hope to mitigate the effect of investment banking influence by forbidding analysts to become involved in pitching for investment banking business. Firms involved in offerings will also have an extended quiet period and payment deals between firms and issuers will also undergo enhanced disclosure.


Research analysts also enjoy greater independence after the SEC prohibited firms from acting against researchers who provide information that may affect company performance.


William Donaldson, chairman of the SEC, comments: "The rules approved by the SEC today require a critical and necessary separation of research analyst compensation from investment banking. Such conflicts have undermined confidence in our markets and must stop. Today's efforts will provide participants with clear guidelines for restoring confidence in the integrity of research."


This most recent action will help quell fears that investment banking interests hold excessive influence on firms' research and follows SEC action in April 2003 against a number of securities firms' over their influence on research practice.

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