Bloomberg News

SEC’s Schapiro Warns Congress Against Return to Analyst Scandals

March 15, 2012

Congress should revise legislation aimed at spurring job-creation to avoid eroding safeguards that keep Wall Street bankers from cutting deals for positive analyst research, U.S. Securities and Exchange Commission Chairman Mary Schapiro said in a speech.

Legislation passed by the House last week -- meant to make it easier for companies to go public -- would weaken the wall between analysts and underwriters, Schapiro said in remarks prepared for delivery today at a Society of American Business Editors and Writers conference in Indianapolis.

“The House bill would begin chipping away at that wall, eliminating reforms designed to ensure that investors receive objective analysis,” Schapiro said, recalling abuses that occurred in late 1990s during the dot-com bubble. “Collusive behavior between analysts and bankers cost investors huge sums, shattered confidence in the integrity of research and damaged the markets themselves.”

A dozen Wall Street firms including Goldman Sachs Group Inc., (GS) JPMorgan Chase & Co., (JPM) Citigroup Inc. (C) and UBS AG (UBSN) settled claims by regulators in 2003 that their analysts published misleading research in an attempt to win business for the banking side. Robert Cook, chief of the SEC’s Trading and Markets Division, said in January that the agency was considering expanding analyst-banker separations agreed to in that settlement to the rest of the industry.

To contact the reporter on this story: Jesse Hamilton in Washington at

To contact the editor responsible for this story: Maura Reynolds at

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