|
WACHOVIA FINED $300 MILLION
By, Lawrence C. Melton, Esq.
|
|
(December 3, 2007 - Monday) - WACHOVIA FINED $300 MILLION
by Lawrence C. Melton, Esq.
THE HAYES LAW FIRM, www.dhayeslaw.com, phone 713-862-2152, toll free 1-866-332-3567
Investors need to be aware that some of the analyst reports and research reports they receive may contain biased research. The brokerage firm issuing the report may have an undisclosed incentive. For instance, the brokerage firm may have a financial relationship with the company. The financial relationship may cause the brokerage house to provide a positive review of the company. The result is biased research. This is obviously a problem. We don't want investors to base their decisions on inaccurate information.
Back in 2002, the Financial Industry Regulatory Authority (FINRA) tried to fix this problem by promulgating a number of conflict of interest disclosure rules for research analyst. The rules provide investors with information about potential conflicts of interest that could influence analysts’ conclusions about investing in a company.
But the problem persists as evidenced by last weeks action against Wachovia. On November 28, 2007, FINRA announced it had fined Wachovia Capital Markets, LLC, $300,000 for violating research analyst conflict of interest disclosure rules. Wachovia issued research reports that failed to disclose Wachovia's financial relationship with the company. The research reports also failed to disclose (1) that it received compensation from the subject company for investment banking services or (2) that it owned interest in the stock of the company or (3) that it was "making a market" in the securities of the company. (See FINRA Press Release, November 28, 2007).
Here is a link to the FINRA Press Release: http://www.finra.org/PressRoom/NewsReleases/2007NewsReleases/P037532
|
