Comment to File No. S7-30-02
Dear Mr. Katz:
Please accept these comments regarding regulation AC.
I am opposed to the proposal. My opinions generally are reflected in the letter from Joseph Borg, president of NASAA in his Sept. 23, 2002 comment letter.
I believe that this proposal is essentially a political exercise. As Mr. Borg and NASA note, basic securities law has for many years precluded analysts from being dishonest. Therefore, the regulation is not needed.
I agree with Mr. Borg's statement that analysts are scapegoats. If the Commission proposes to have analysts certify their research reports, then be SEC should as well require CEOs of brokerage firms to certify personally their firm's compliance with all rules and regulations, including certifying that no pressure or incentives have been offered to analysts in return for a positive report.
Instead of new rulemaking, the Commission should instead investigate, or refer to its inspector general, the question of why he SEC and SROs never took enforcement action for what is now known to be and industry-wide problem. For years, regulators have known that analysts were less than honest. For example, in early 2000, the Wall Street Journal reported that the CEO of Citigroup put pressure on that company's analyst to upgrade the recommendation of a security. Only when this instance became widely reported did regulators take any sort of enforcement action.
As is too often the case, the SEC should refrain from needless rulemaking and do a better job enforcing existing rules.