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U.S. Code as of:
01/19/04
Section 78o-6. Securities analysts and research reports
(a) Analyst protections
The Commission, or upon the authorization and direction of the
Commission, a registered securities association or national
securities exchange, shall have adopted, not later than 1 year
after July 30, 2002, rules reasonably designed to address conflicts
of interest that can arise when securities analysts recommend
equity securities in research reports and public appearances, in
order to improve the objectivity of research and provide investors
with more useful and reliable information, including rules designed
-
(1) to foster greater public confidence in securities research,
and to protect the objectivity and independence of securities
analysts, by -
(A) restricting the prepublication clearance or approval of
research reports by persons employed by the broker or dealer
who are engaged in investment banking activities, or persons
not directly responsible for investment research, other than
legal or compliance staff;
(B) limiting the supervision and compensatory evaluation of
securities analysts to officials employed by the broker or
dealer who are not engaged in investment banking activities;
and
(C) requiring that a broker or dealer and persons employed by
a broker or dealer who are involved with investment banking
activities may not, directly or indirectly, retaliate against
or threaten to retaliate against any securities analyst
employed by that broker or dealer or its affiliates as a result
of an adverse, negative, or otherwise unfavorable research
report that may adversely affect the present or prospective
investment banking relationship of the broker or dealer with
the issuer that is the subject of the research report, except
that such rules may not limit the authority of a broker or
dealer to discipline a securities analyst for causes other than
such research report in accordance with the policies and
procedures of the firm;
(2) to define periods during which brokers or dealers who have
participated, or are to participate, in a public offering of
securities as underwriters or dealers should not publish or
otherwise distribute research reports relating to such securities
or to the issuer of such securities;
(3) to establish structural and institutional safeguards within
registered brokers or dealers to assure that securities analysts
are separated by appropriate informational partitions within the
firm from the review, pressure, or oversight of those whose
involvement in investment banking activities might potentially
bias their judgment or supervision; and
(4) to address such other issues as the Commission, or such
association or exchange, determines appropriate.
(b) Disclosure
The Commission, or upon the authorization and direction of the
Commission, a registered securities association or national
securities exchange, shall have adopted, not later than 1 year
after July 30, 2002, rules reasonably designed to require each
securities analyst to disclose in public appearances, and each
registered broker or dealer to disclose in each research report, as
applicable, conflicts of interest that are known or should have
been known by the securities analyst or the broker or dealer, to
exist at the time of the appearance or the date of distribution of
the report, including -
(1) the extent to which the securities analyst has debt or
equity investments in the issuer that is the subject of the
appearance or research report;
(2) whether any compensation has been received by the
registered broker or dealer, or any affiliate thereof, including
the securities analyst, from the issuer that is the subject of
the appearance or research report, subject to such exemptions as
the Commission may determine appropriate and necessary to prevent
disclosure by virtue of this paragraph of material non-public
information regarding specific potential future investment
banking transactions of such issuer, as is appropriate in the
public interest and consistent with the protection of investors;
(3) whether an issuer, the securities of which are recommended
in the appearance or research report, currently is, or during the
1-year period preceding the date of the appearance or date of
distribution of the report has been, a client of the registered
broker or dealer, and if so, stating the types of services
provided to the issuer;
(4) whether the securities analyst received compensation with
respect to a research report, based upon (among any other
factors) the investment banking revenues (either generally or
specifically earned from the issuer being analyzed) of the
registered broker or dealer; and
(5) such other disclosures of conflicts of interest that are
material to investors, research analysts, or the broker or dealer
as the Commission, or such association or exchange, determines
appropriate.
(c) Definitions
In this section -
(1) the term "securities analyst" means any associated person
of a registered broker or dealer that is principally responsible
for, and any associated person who reports directly or indirectly
to a securities analyst in connection with, the preparation of
the substance of a research report, whether or not any such
person has the job title of "securities analyst"; and
(2) the term "research report" means a written or electronic
communication that includes an analysis of equity securities of
individual companies or industries, and that provides information
reasonably sufficient upon which to base an investment decision.
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