SEC Chairman Harvey Pitt described the rules as an 'impressive first step' and they look to form the basis for a radical shake of Wall Street, which is currently being subjected to a number of US federal investigations into the alleged issuing of biased stock research.
The new rules will prevent analysts' pay from being linked to specific investment banking deals and ban them from issuing favourable opinions on stocks in return for investment banking business. In future analysts will be prevented from having a reporting line into an investment banking department.
The industry is expected to welcome the new set of rules as they are not onerous. Investors who lost money as a result of following analysts' recommendations will no doubt wonder why these simple commonsense procedures were not in place long ago.
Analysts To Face More Restrictions
The US Securities & Exchange Commission (SEC) has now approved new rules for stock analysts in order to safeguard against possible conflict of interest between the investment banking and research arms of brokerage houses.
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