Securities Analyst Recommendations

Financial analysts exert considerable influence in today’s marketplace. Analyst recommendations can significantly move a company’s stock price, especially when they are widely disseminated through television appearances or through other electronic and print media. The SEC receives a number of complaints about analysts who recommend buying a stock in a company, where the investor believes the analyst has a financial or some other interest in the company.

Analysts must disclose possible conflicts of interest whenever they recommend the purchase or sale of a specific security. For example, analysts must divulge if they or the brokerage firm they work for has a financial position in a recommended security. Analysts must also disclose if their firms make a market in the security or have an investment banking relationship with the company.

The SEC cautions investors not to rely solely on any analyst recommendation. Instead, investors need to ask questions about their investments and know what their buying and why. For more information and tips on what questions to ask, please read our online brochure entitled Analyzing Analyst Recommendations.