Bloomberg News

February 19, 2003


Securities and Exchange Commission
450 Fifth Street, N.W.

Washington, DC 20549-0609


File No. SR-NYSE-2002-49; SR-NASD-2002-154: Notice of Filing of Proposed Rule Changes by the New York Stock Exchange, Inc. Relating to Exchange Rules 344, 345A, 351 and 472 and by the National Association of Securities Dealers, Inc. Relating to Research Analyst Conflicts of Interest,
SEC Release No. 34-47110 (October 9, 2002)                                                 

Ladies and Gentlemen:

I am the Editor-in-Chief of Bloomberg News. I respectfully submit this comment letter to express Bloomberg's concerns regarding certain aspects of the New York Stock Exchange's Proposed Rule Text of Rule 472, "Communications With the Public." Specifically, Bloomberg would object to any imposition -- whether direct or indirect -- on the media of the mandatory disclosures that the Exchange seeks to impose on research analysts. Bloomberg News respectfully suggests that the proposed rule must be clarified to make explicit that print journalists may, in their editorial discretion and without penalty to their publications or imposing restrictions upon access to a research analyst, decline to publish the conflict disclosures required of the analyst.

Bloomberg News is a 24-hour global news service with more than 1,200 reporters and editors stationed in more than 80 news bureaus around the world. Bloomberg News electronically delivers news stories to more than 200,000 readers via more than 160,000 Bloomberg computer terminals around the world. Bloomberg News also supplies news stories to more than 300 newspapers worldwide, including The New York Times, The Washington Post, The Los Angeles Times, The Chicago Tribune and The Boston Globe, all of which publish stories under the byline of "Bloomberg News." Bloomberg News publishes more than 5,000 news stories each day.

Over the past several years Bloomberg News has appeared as an intervenor or "amicus curiae" in cases around the country to help maintain the vigor of the press's First Amendment rights to investigate and report on matters of public interest without undue governmental interference or mandate. For the same reason, Bloomberg News is compelled to add its voice to this debate because the proposed rule, if not clarified, could constitute a dangerous governmental regulation of the content of news reports.

The proposed rule would require research analysts who give interviews to the print media to include various items of information that the Exchange deems to be generally relevant to analysts' potential conflicts of interest. If the rule stopped there we would raise no objection. The Exchange, however, has advised members that if a publisher omits the mandated disclosures - without regard to reason for such omission - it expects the analyst to refrain from future contact with that outlet. Here the rule goes too far.

For this reason, the proposed rule intrudes upon cherished constitutional principles. The Supreme Court of the United States has made clear that the First Amendment does not "authorize any restriction whatsoever, whether of content or layout, on stories or commentary."1 Rather, the Court has "reaffirm[ed] unequivocally the protection afforded to editorial judgment and to the free expression of views" in the media. Id. Thus, the government cannot be allowed to interfere in the editorial process of determining what facts should go into a publication regarding matters of public interest.2 Where editorial discretion is required, it must reside with reporters and editors, not governmental regulators. We know as well as anyone the need that investors have of access to all the salient facts concerning their investment decisions. But that legitimate interest does not trump the media's First Amendment right to determine, without governmental interference, what information to publish.3

Even though the proposed rule seems to be directed only at analysts, the rule carries an indirect but nonetheless impermissible restriction upon the press. As the Court stated in Miami Herald v. Tornillo, "Governmental restraint on publishing need not fall into familiar or traditional patterns to be subject to constitutional limitations on governmental powers."4 While the proposed rule may not be a traditional restriction on speech, it nonetheless amounts to a governmentally-imposed requirement that the media publish certain items of information or suffer the punishment of losing access to a source of information.

In many respects the Exchange's proposed rule is consistent with good journalism, and we would probably deem the analysts' disclosures in most instances to be information that should be included in our news reports. But that does not remove the rule's constitutional taint. Without editorial discretion, reports on statements by research analysts could become cluttered with boilerplate language, and the public is thus deprived of the judgment of experienced business journalists as to what information is and isn't relevant.

Moreover, the Exchange's interpretation of the proposed rule leaves no room for the realities of publishing. The exigencies of the deadline combined with simple human error may result in inadvertent omission of the disclosure, which would have the effect of barring future access to that analyst. The First Amendment does not provide for such strict liability.

The proposed rule should make clear that analysts' disclosure obligations would be fulfilled by disclosing potential conflicts to whom they speak with, and that the media are free to exercise unfettered, independent judgment in determining how and whether to utilize such disclosures in their news reports. The proposed rule should also make explicit that research analysts can continue to speak with a media outlet, without penalty, regardless of whether that outlet has included the conflict disclosures in its past reports.

Respectfully submitted,


Matthew Winkler
Bloomberg News

cc: Edward Kwalwasser
Executive Vice-President for Regulation
New York Stock Exchange

1 Tornillo, 418 U.S. at 255, quoting Pittsburgh Press Co. v. Human Relations Comm'n, 413 U.S. 376 (1973).
2 Tornillo, 418 U.S. at 258.
3 See Lowe v. SEC, 472 U.S. 181, 230 (1985) (White, J., concurring) ("At some point, a measure is no longer a regulation of a profession but a regulation of speech or of the press; beyond that point, the statute must survive the level of scrutiny demanded by the First Amendment." See also, Reliance Ins. Co. v. Barron's, 442 F. Supp. 1341, 1353 (S.D.N.Y. 1977) ("The securities laws ... were not developed with the intention of ... inhibit[ing] the exercise of freedom of the press.").
4 418 U.S. 241, 256 (1974).