The war on analysts is now threatening brokers. In proposing heightened disclosures from analysts, the NASDR has included retail brokers as well.
The July proposal, NASD Notice to Members 01-45, broadens disclosure obligations for public appearances by analysts and brokers when specific recommendations are made.
If the proposal is passed as is, brokers and analysts would be required to disclose: 1) their personal holdings and holdings in accounts they manage on a discretionary basis, 2) if their firm owns 5% or more of the company’s stock, and 3) whether the issuer is an investment banking client of their brokerage firm.
Aside from the risk that a rep could unwittingly run afoul of the rule in giving an opinion, securities attorneys are sounding alarm bells about disclosing personal holdings.
Recommending a security based on the fact that you own it yourself is bad practice, attorneys warn, since a broker’s own investments are irrelevant for suitability considerations. Yet, disclosure can be quite convincing.
The NASDR declines comment on why it is proposing to cover brokers.
For more on this story, see the upcoming September 2001 issue of Registered Representative magazine.
The proposal can be found at www.nasdr.com under Notice to Members 01-45 from July 2. The URL is: www.nasdr.com/pdf-text/0145ntm.txt. The comment period ended Aug. 15, 2001.
Editor's note: For any comments regarding this article, or to suggest a story idea for RR Online or Registered Representative magazine, contact Editor in Chief Dan Jamieson at [email protected], Online Editor Rick Weinberg at [email protected], Online Managing Editor Cheryl Cooper at [email protected] or Senior Editor Michael Hayes at [email protected]