SEC Plans Disclosure Rules for TV Advisors

Wall Street analysts and money managers who recommend securities on TV will face new disclosure rules, Securities and Exchange Commission Chairman Arthur Levitt said Thursday.

The idea, first broached by the SEC in June, is apparently on a fast track: Levitt said his staff will work with the New York Stock Exchange and the National Assn. of Securities Dealers to develop the rules “in short order.”

“Investors deserve to know what possible incentives an investment services professional may have in making a particular recommendation,” Levitt said.

The possible conflicts that concern the SEC, he said, involve an analyst’s personal investments in stocks he recommends as well as his firm’s ownership of these stocks. Other possible conflicts involve the firm’s investment-banking work for companies reviewed by the analyst, Levitt said.

Regulatory obligations would fall on brokerages rather than news organizations, over which the SEC has no authority. The SEC’s proposals will cover investment advisors, while those of the NYSE and NASD will apply to analysts employed by brokerages, SEC spokesman Chris Ullman said.

Analysts often are asked for their leading stock picks on financial news networks such as CNBC.

A leading brokerage trade group raised preliminary questions about the SEC’s idea. “Any rule they come up with has got to work for the TV format,” said James Spellman, spokesman for the Securities Industry Assn. “We support making sure investors understand the context of the information they receive, though we’ll have to see the fine print of any proposals.”

Some TV producers have said the SEC’s idea raises 1st Amendment issues.