CITE

    15 USC Sec. 78o-6                                           01/08/2008

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2B - SECURITIES EXCHANGES

HEAD

    Sec. 78o-6. Securities analysts and research reports

STATUTE

    (a) Analyst protections
      The Commission, or upon the authorization and direction of the
    Commission, a registered securities association or national
    securities exchange, shall have adopted, not later than 1 year
    after July 30, 2002, rules reasonably designed to address conflicts
    of interest that can arise when securities analysts recommend
    equity securities in research reports and public appearances, in
    order to improve the objectivity of research and provide investors
    with more useful and reliable information, including rules designed
    -
        (1) to foster greater public confidence in securities research,
      and to protect the objectivity and independence of securities
      analysts, by -
          (A) restricting the prepublication clearance or approval of
        research reports by persons employed by the broker or dealer
        who are engaged in investment banking activities, or persons
        not directly responsible for investment research, other than
        legal or compliance staff;
          (B) limiting the supervision and compensatory evaluation of
        securities analysts to officials employed by the broker or
        dealer who are not engaged in investment banking activities;
        and
          (C) requiring that a broker or dealer and persons employed by
        a broker or dealer who are involved with investment banking
        activities may not, directly or indirectly, retaliate against
        or threaten to retaliate against any securities analyst
        employed by that broker or dealer or its affiliates as a result
        of an adverse, negative, or otherwise unfavorable research
        report that may adversely affect the present or prospective
        investment banking relationship of the broker or dealer with
        the issuer that is the subject of the research report, except
        that such rules may not limit the authority of a broker or
        dealer to discipline a securities analyst for causes other than
        such research report in accordance with the policies and
        procedures of the firm;
        (2) to define periods during which brokers or dealers who have
      participated, or are to participate, in a public offering of
      securities as underwriters or dealers should not publish or
      otherwise distribute research reports relating to such securities
      or to the issuer of such securities;
        (3) to establish structural and institutional safeguards within
      registered brokers or dealers to assure that securities analysts
      are separated by appropriate informational partitions within the
      firm from the review, pressure, or oversight of those whose
      involvement in investment banking activities might potentially
      bias their judgment or supervision; and
        (4) to address such other issues as the Commission, or such
      association or exchange, determines appropriate.
    (b) Disclosure
      The Commission, or upon the authorization and direction of the
    Commission, a registered securities association or national
    securities exchange, shall have adopted, not later than 1 year
    after July 30, 2002, rules reasonably designed to require each
    securities analyst to disclose in public appearances, and each
    registered broker or dealer to disclose in each research report, as
    applicable, conflicts of interest that are known or should have
    been known by the securities analyst or the broker or dealer, to
    exist at the time of the appearance or the date of distribution of
    the report, including -
        (1) the extent to which the securities analyst has debt or
      equity investments in the issuer that is the subject of the
      appearance or research report;
        (2) whether any compensation has been received by the
      registered broker or dealer, or any affiliate thereof, including
      the securities analyst, from the issuer that is the subject of
      the appearance or research report, subject to such exemptions as
      the Commission may determine appropriate and necessary to prevent
      disclosure by virtue of this paragraph of material non-public
      information regarding specific potential future investment
      banking transactions of such issuer, as is appropriate in the
      public interest and consistent with the protection of investors;
        (3) whether an issuer, the securities of which are recommended
      in the appearance or research report, currently is, or during the
      1-year period preceding the date of the appearance or date of
      distribution of the report has been, a client of the registered
      broker or dealer, and if so, stating the types of services
      provided to the issuer;
        (4) whether the securities analyst received compensation with
      respect to a research report, based upon (among any other
      factors) the investment banking revenues (either generally or
      specifically earned from the issuer being analyzed) of the
      registered broker or dealer; and
        (5) such other disclosures of conflicts of interest that are
      material to investors, research analysts, or the broker or dealer
      as the Commission, or such association or exchange, determines
      appropriate.
    (c) Definitions
      In this section -
        (1) the term "securities analyst" means any associated person
      of a registered broker or dealer that is principally responsible
      for, and any associated person who reports directly or indirectly
      to a securities analyst in connection with, the preparation of
      the substance of a research report, whether or not any such
      person has the job title of "securities analyst"; and
        (2) the term "research report" means a written or electronic
      communication that includes an analysis of equity securities of
      individual companies or industries, and that provides information
      reasonably sufficient upon which to base an investment decision.

SOURCE

    (June 6, 1934, ch. 404, title I, Sec. 15D, as added Pub. L. 107-
    204, title V, Sec. 501(a), July 30, 2002, 116 Stat. 791.)

COMMISSION AUTHORITY

      Pub. L. 107-204, title V, Sec. 501(c), July 30, 2002, 116 Stat.
    793, provided that: "The Commission may promulgate and amend its
    regulations, or direct a registered securities association or
    national securities exchange to promulgate and amend its rules, to
    carry out section 15D of the Securities Exchange Act of 1934 [15
    U.S.C. 78o-6], as added by this section, as is necessary for the
    protection of investors and in the public interest."