Sarbanes Oxley Act Section 501

 

SEC. 501. TREATMENT OF SECURITIES ANALYSTS BY REGISTERED
SECURITIES ASSOCIATIONS AND NATIONAL SECURITIES
EXCHANGES.
 
(a) RULES REGARDING SECURITIES ANALYSTS.—
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 15C the following new section:
 
‘‘SEC. 15D. 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 the date of enactment of this section,
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 the date of enactment of this section, 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.’’.
 
(b) ENFORCEMENT.—Section 21B(a) of the Securities Exchange
Act of 1934 (15 U.S.C. 78u–2(a)) is amended by inserting ‘‘15D,’’
before ‘‘15B’’.
 
(c) COMMISSION AUTHORITY.—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, as added by this section, as is necessary for the protection
of investors and in the public interest.

 
   

 

Sarbanes Oxley Compliance Professionals Association (SOXCPA)

Certified Sarbanes-Oxley Expert (CSOE) - Distance learning and online certification program