“The Securities and Exchange Commission approved a rule requiring Wall Street analysts, who have been under fire for misleading investors, to certify that they actually believe what they put in research reports and public statements,” writes Deborah Solomon in today’s Wall Street Journal.

“The SEC will also require that analysts sign statements verifying that they didn’t receive any compensation related to the stock recommendations, research or comments they provide. ‘We want analysts to say what they mean, mean what they say, and sign their name to it,’ said Commissioner Cynthia Glassman.”

“The SEC took steps to adopt the rule amid allegations that analysts’ opinions were influenced by investment-banking business. In recent months, several high-profile analysts, including Jack Grubman, formerly of Citigroup Inc.’s Salomon Smith Barney Inc., and Henry Blodget, formerly of Merrill Lynch & Co., have been accused of providing positive research that they didn’t believe in a bid to win more banking business for their firms. Last year, New York Attorney General Eliot Spitzer released documents and e-mails showing that Mr. Blodget had privately used profanities to denigrate stocks that he was publicly recommending.”

“The effort to overhaul stock research practices is also at the core of the $1.5 billion global settlement announced late last year that the SEC and other securities regulators are finalizing with the biggest U.S. securities firms.”

“While analysts’ behavior has been a big focus of late, some said the SEC’s rule isn’t likely to have much effect on the conflict-of-interest problem within the brokerage industry. ‘This is one more patch of only marginal value on an analyst system that is badly broken,’ said Commissioner Harvey Goldschmid, who nevertheless voted for the rule.”

“Barbara Roper, director of investor protection with the Consumer Federation of America, said solutions to the problems plaguing Wall Street will likely come out of the global settlement, not the SEC rule. ‘I don’t view this as a terribly significant reform,’ she said. The settlement will likely provide much more concrete fixes, such as a split between the research and banking arms of financial firms.”

“Still, some analysts may think twice if they must sign their names to research. ‘This raises the sensitivity of the analysts, just like you saw when CEOs and [chief financial officers] had to certify their financial results,’ said James Spellman, spokesman for the Securities Industry Association. The SIA, which represents more than 600 securities firms, supported the rule.”

“Legal experts said certification would make it easier for the SEC to bring civil charges against someone who the agency has found to have given a false statement. That could make some analysts feel more accountable, said Ms. Roper. Or, she said, it is possible that ‘analysts will be a lot more careful about hiding their real opinions.’ “