In a letter to the Securities and Exchange Commission, the U.S. Securities Industry Association warns that the NASD’s and New York Stock Exchange’s newest rule proposals for research analysts are ambiguous, problematic, and contain numerous inconsistencies between each other and between themselves and the SEC’s Analyst Certification rule.

These proposals come after the self-regulating organizations have adopted a number of new rules guiding the behavior of research analysts. Considerable ambiguities in the SRO proposals, such as analysts’ prescribed “due diligence” activities for investment-banking clients, will make compliance difficult, says the SIA. Moreover, the virtual ban on research supervisors from owning equity securities will discourage the most qualified people from wanting to oversee research, it says.

SIA also has significant concerns with three specific provisions. Firstly, the NYSE proposal expands the scope of persons covered so broadly that its rules would apply to a huge range of personnel outside firms’ research departments.

Secondly, the proposed ban on analysts’ solicitation of investment-banking business and the uncertainty in the scope of the “due diligence” exemption are so vague that they will inhibit normal analyst communications with private companies, weakening analysts’ understanding of the industries they cover.

Thirdly, the approach to analysts’ public appearances in the NYSE proposal inappropriately attempts to indirectly regulate the news media’s editorial discretion, and in both SRO cases injects unnecessary confusion.

Finally, SIA believes that investors and the capital markets would be better served if the SEC replaced the self-regulatory organizations’ proposals with one national rule that also addresses the provisions of the Sarbanes-Oxley Act.