§ 78o. — Registration and regulation of brokers and dealers.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78o-6]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78o-6. Securities analysts and research reports
(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.
(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.''
Section Referred to in Other Sections
This section is referred to in section 78u-2 of this title.
