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U.S. Securities and Exchange Commission

SEC Cautions Investors About Analyst Recommendations



Investor alert provides tips for assessing analyst recommendations and decodes commonly used disclosures

Washington, D.C., June 28, 2001 – The Securities and Exchange Commission has issued an investor alert urging investors not to rely solely on analyst recommendations when deciding to buy, hold, or sell stock. Instead, investors should consult multiple sources of information while considering their own investment goals and tolerance for risk.

Explaining the relationships between securities analysts and the investment banking and brokerage firms that employ them, the alert educates investors about potential conflicts of interest analysts may face. In particular, the alert notes, some analysts work for firms that underwrite — or even own — the securities of the companies the analysts cover. And in other cases, analysts themselves might own stocks in the companies they cover — either directly or indirectly through employee stock-purchase pools in which they and their colleagues participate.

Acting Chairman Laura S. Unger said, "Financial analysts have been the focus of intense public scrutiny in recent months, and I am hopeful the industry will eliminate the conflicts of interest that threaten the fairness and objectivity of analyst recommendations. Our first priority, however, is making sure individual investors are aware of the practices that have called analyst credibility into question. This investor alert should be required reading for anyone considering an investment decision based on an analyst recommendation."

While analyst research reports can offer valuable insights about companies and industry trends, the investor alert urges investors to also study a company's financial filings and read objective sources of information before making investment decisions. The alert also provides tips to help investors find out whether an analyst or the analyst's firm has a financial interest in a company's securities.

The investor alert is available on the SEC website at www.sec.gov/investor/pubs/analysts.htm. Copies are also available by calling toll-free 1-800-732-0330.



Modified: 06/28/2001