Last week’s damning testimony about analyst integrity before Congress has blunted hopes for relaxation, or even a rollback, of Regulation FD reports the Wall Street Letter.

The newsletter reports that the testimony about compromised equity analysts, “has stifled hopes that the SEC’s controversial Regulation FD may be loosened to make life easier for those analysts, say Congressional and industry sources.”

The industry had hoped that new SEC chair Harvey Pitt would be open to modifying, or dumping, Regulation FD entirely. The Securities Industry Association has said, “The potential for being investigated for aiding and abetting a violation of Regulation FD may cause analysts to become reluctant to press companies for information that goes deeper than the ‘spin’ that the company wishes to put out.”

Stuart Kaswell, SIA general counsel, added that “we also don’t like the idea that the brokerage business is under this cloud where if you’re too aggressive [in digging out information] someone might bring an enforcement action.”

But the argument that Regulation FD is keeping analysts from ferreting out new info is deeply in doubt after numerous witness told a House Financial Services subcommittee that analysts are more interested in greasing the skids for investment banking business.

Ron Glantz, former director of research and chief investment officer for PaineWebber, told the panel, “Analysts used to view retail customers and investment managers as their clients. Now, the job of analysts is to bring in investment banking clients, not provide good investment advice.” He added, “This began in the mid-1980s. The prostitution of security analysts was completed during the high-tech mania of the last few years.”