Biz Nets Don't Fret Analyst Disclosures

Looking to build some credibility for Wall Street firms, the National Association of Securities Dealers may require its members to disclose any financial interests before publicly discussing stocks.

A proposed NASD amendment could have an impact on business-news networks CNBC, CNNfn and Bloomberg Television, which rely on Wall Street analysts to pick stocks and offer guidance to viewers. The amendment would require analysts to disclose any financial interest held in a company they discuss publicly, whether or not their firm holds 5 percent of that firm — or whether it has performed any investment-banking services for the company in the past 12 months.

Last week, NASD released a proposed amendment to its Communications with the Public rule. The association set an Aug. 15 deadline for members and interested parties to submit comments on the proposed rule changes.

The NASD rule-change proposal comes as Wall Street firms are under attack for being overly optimistic in their stock recommendations, despite the slump in the market during the last year.

Last month, the House Financial Services Subcommittee held a hearing on the matter. One criticism levied by committee members was that the overwhelming majority of Wall Street analyst recommendations were "buy" ratings, and that only 2 percent of their recommendations were "sell" ratings.

Some business-news network executives said NASD's proposed rule change wouldn't affect their programs, since they already ask analysts to disclose conflicts of interests before appearing on television.

"I think we try to be as transparent as we can to investors," said Bloomberg managing editor John Meehan. "To essentially have analysts disclose their relationships will not affect the way we do business."

CNBC lists a set of guidelines on its Web site that require analysts who appear on its programs to disclose any investment-banking relationships their firms have with companies they discuss, or whether they own a stock they discuss on CNBC shows.

The network also tells analysts not to short stocks that they recommend to viewers as a good buy, and vice versa.

"Your financial activity will be consistent with the opinions you express on CNBC," the network writes in the guidelines.

CNBC spokesman Paul Capelli said that having analysts with personal stakes in the stocks they discuss is a good thing — as long as they disclose any conflicts.

"You want people that are in the game," said Capelli. "You want people that are putting money where their mouth is. But they have to be clear that they are speaking from that perspective."