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BNP Asset Management's Pojarliev discusses a variety of options to address foreign currency exposures. Although there is no single best-practice solution for addressing foreign currency exposures, institutional investors have three main choices, he says.

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November 1, 2001

Analysts Must Come Clean

By Gregory Bresiger

The National Association of Securities Dealers, responding to criticism that Wall Street analysts aren't disclosing all conflicts of interest, is working on a new rule that would force analysts to give more information on their private holdings and their firms' relationships with market makers.

Officially, an NASD spokeswoman would only say that, "we cannot comment on any of that at this time." However, an NASD governor, Richard Romano, was quoted in a published report as saying that, "There has been some formal discussion on it." Romano, the president of the investment firm, Romano Brothers & Co., in Evanston, Ill., added that there has been no decision on a rule change.

Negative Comments

The last year and a half have been a bad time for many analysts. Few actually made any negative comments about the tech stocks that have tanked since the spring of 2000. But complaints have flooded Wall Street that analysts are pitching stocks that they owned or in which their employers held a stake or in which their firms are making a market.

That's why the NASD's Regulatory Division proposed a tougher analyst rule earlier this year. As originally proposed last summer, the NASD rule would require firms to disclose if they own more than a five-percent stake of a company's stock that they're trying to sell. The rule would also mandate the disclosure of the ownership of any position, including a short position, by an analyst employed by the firm. And it would require that an investor be told if a financial company made any compensation to a selling firm within the last 12 months. Market making relationships would have to be clarified.

Under the current regulations, firms must today disclose if they acted as a market maker or an underwriter in the last three years and if the brokerage firm or its officers own options, rights or warrants in the company that is being analyzed. For many critics of the trading industry, those standards aren't good enough.

Merrill Lynch and Credit Suisse First Boston are among the big firms that have recently imposed new, tougher disclosure restrictions on the holdings of their analysts. However, finding new standards that are acceptable to most parties is difficult. "It's a tough issue, there's no easy resolution, but they're working on it," Eugene Isenberg, an NASD governor, said in a published report. Any proposed rule changes approved by the NASD must be reviewed by the Securities and Exchange Commission.