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Open Letter to SEC Chair Mary Sharpiro on Regulation AC
 
       
  We understand that Congress is pressing you to implement new SEC rules to regulate the excesses on Wall Street. However, we would encourage to start your tenture at the SEC by enforcing Regulation AC which was passed after the last major stock market correction in 2000. This regulation was designed to prevent abuses like those that occurred when Merrill Lynch's internet analyst Henry Blodget expressed positive opinions in research reports to clients but negative opinions in emails to colleagues. As we show below, several years ago the SEC investigated but failed to prosecute a well documented and widely publicized Regulation AC case which was referred to the SEC by the then Chairman of the Senate Finance Committee. Before you consider passing new rules and regulations, we encourage you to reopen this case and prosecute what is a clear violation of the one of the key regulations passed by, but not enforced by, the SEC after the last market crash.  
       
  The timeline below shows the key events when an investment bank chaired by General Wesley Clark refused to let their top-rated analyst lower his research rating on an investment banking client and then also refused to allow him to have his named removed from coverage of that stock. The timeline contains hyperlinks to the actual emails, letters, articles, etc. so that viewers of this web site can form their own conclusions based upon facts. This dispute has been reviewed by the New York Attorney General's office, the Federal Courts (Southern District - NY), the Senate Finance and Banking Committees. The Senate Finance Committee has released a copy of remarks by Rodman's Chairman (General Wesley Clark) to Senate investigators in which he indicates that the decision to fire the analyst was due to his reporting Rodman's regulatory violations to Congress. FINRA, the combined regulatory organizations of the NASD and NYSE, is involved with both its enforcement and arbitration groups.  
       
  2/24/06 TARGET PRICE  Analyst decides to downgrade rating on investment banking client because it's stock price has reached his target price.  
  2/25/06 FINESSE REQUEST  Director of Research emails analyst to suggest he "finesse the target price" rather than lower the investment rating.  
  2/27/06 REPORT SUBMITTED  Analyst declines Director of Research's suggestion and emails the report to members of Investment Committee.  
  2/27/06 REPORT REJECTED  Director of Research sends a email to the analyst in which he refuses to allow the report to be reviewed by the IRC.  
  2/28/06 COMPLIANCE INACTION  Analyst emails (#1 and #2) Head of Compliance asking to have his name removed from coverage of the stock.  
  3/2/06 RETALIATION #1  Rodman emails its employees announcing that analyst is being removed from the Research Department.  
  3/9/06 CONGRESS INFORMED  Analyst tells US Senate Finance Committee about Rodman's actions and provides copies of emails.  
    DECISON TO FIRE  Wesley Clark later tells Senate investigators that Rodman partner (John Borer) says analyst has "gone too far this time."  
  3/14/06 RETALIATION #2  Rodman emails analyst notification that his employment has been terminated with no written explanation for cause.  
  3/15/06 ANALYST SEEKS HELP  Analyst calls Finance Committee and says Rodman told him that he was fired for reporting matter to Congress.  
  3/15/06 SEC INVESTIGATION  Analyst receives call from lawyer in the enforcement division of the Securities and Exchange Commission.  
  4/9/06 NY TIMES  Gretchen Morgenson, who received Pulitzer Prize for Wall Street Global Settlement reporting, writes article Rodman's actions.  
  4/12/06 RETALIATION #3  Rodman claims on analyst's U-5 that investigation had been started against analyst in February. Analyst never contacted.  
  5/25/06 GENERAL CLARK  Receives letter from Senate Finance Committee Chairman Grassley telling him to appear before staff investigators.  
  5/25/06 SEC LETTER  Chairman Grassley and Ranking Member Baucus send letter to SEC Chairman asking for update on Rodman investigation.  
  7/13/06 SENATE INVESTIGATION  General Clark appears before Senate Finance Committee and answers questions about Rodman investigation.  
  9/20/06 SENATE LETTER  Recaps General Clark's statement that Rodman partner said analyst should be fired for reporting matter to Congress.  
  10/4/06 NY POST  Article reports that NY Attorney General and SEC have issued subpoenas against Rodman in regards to analyst case.  
  10/5/06 NY TIMES  Article by Gretchen Morgenson reveals Senate letter that suggests analyst was fired for reporting matter to Congress.  
  10/5/06 CNBC  Devotes a six minute segment (video link) of their aftermarket show to research independence and features the analyst fired by Rodman.  
  10/5/06 RETALIATION #4  General Clark calls Maria Bartiromo before show to reveal a member of analyst's family.  
  10/12/06 WEB INTEREST  There were 20,343 requests for this web site between October 5 and October 12 according to this host's web report.  
  11/7/06 ELECTION  Senator Baucus, who endorsed General Clark for President, becomes Chairman of Finance Committee.  
  12/22/06 FEDERAL LAWSUIT  Judge rules against Rodman after they file a lawsuit against the independent analyst for putting this info on web site.  
  05/02/07 NASD ARBITRATION  Selection of arbitrators began for arbitration that was originally planned for 2H07, but delayed until Dec-08.  
       
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