Statement By New York Attorney General Eliot Spitzer Regarding The President's Comments On Analyst Conflicts Of Interest

Although President Bush acknowledged that conflicts of interests by securities analysts are a major problem, he failed to articulate a solution. Instead, the President hid behind a weak House proposal addressing corporate accountability and wholly inadequate SEC rules that were formulated early this year, well before the evidence demonstrating the severity of the analyst conflicts came to light.

In this regard, neither the House bill nor the SEC rules would address the most egregious abuses my office identified in the Merrill Lynch investigation. For example, under the SEC rules, investment bankers are still allowed to influence analyst compensation - thus perpetuating the conflict of interest that leads to tainted advice.

In addition, the SEC rules fail to provide adequate disclosures to the public. The rules do not require clearer disclosure upon termination of coverage, and fail to require firms to disclose whether analysts authoring research reports solicited investment banking business in the past year.

In order to address this issue adequately, the SEC must impose new nationwide rules to regulate analysts and prevent the sort of abuses my office discovered in the Merrill Lynch case. The President today missed an important opportunity to help restore investor confidence. His speech was a profound disappointment. It's simply not enough to call on corporate leaders to do the right thing. This problem will only be solved with tough new laws and aggressive enforcement.

Until the issue of analyst conflicts is addressed, it is incumbent on state regulators to continue their pursuit of enforcement actions and to obtain the relief necessary to protect the investing public.