Analyst Disclosure Issues

Analyst Disclosure Issue Would Snag Brokers

New NASD Proposal will require more disclosures by retail brokers.

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. “‘He told me he owned it himself,’” is a common charge in customer arbitrations, says Mark Astarita, a lawyer at Beam & Astarita in New York City.

Gerald Rath, a partner in the Boston law firm of Bingham Dana, says: “What’s suitable for you might not be suitable for your client. And if it’s considered inappropriate to talk about your own investments [in making a recommendation], why should it be different when addressing a small group?”

Since an individual broker’s recommendation is unlikely to move a stock, a rep does not face the same conflict an analyst does in issuing a opinion for a firm, Rath says. So requiring brokers to disclose personal holdings “just doesn’t make a whole lot of sense. It could do more harm than good.”

So why is the NASDR proposing to cover brokers? The NASDR declines comment. Its notice says only that the NASDR board “felt strongly” that the disclosure standards should apply to “all financial services providers” and “all securities professionals.”

The proposal and a comment form can be found at under an Announcements section.

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Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.