“The Securities and Exchange Commission approved new ethics rules for stock analysts Wednesday as its chairman faced growing calls to step down for being insensitive to his own conflicts of interest and for undermining public confidence in the markets,” writes Stephen Labaton in today’s New York Times.

“With minor modifications, the commission unanimously approved the analyst rules proposed this year by the New York Stock Exchange and the National Association of Securities Dealers. The rules were applauded by some of Wall Street’s largest firms. The industry’s main trade group, the Securities Industry Association, called them tough and necessary for maintaining trust, but said they would be onerous for smaller firms.”

“Some Democrats, institutional investors and consumer groups complained that the rules were both tardy and tepid and were intended by industry cheerleaders to head off more stringent proposals for a ban on allowing analysts to work on merger and underwriting business for clients of their investment banks.”

“Senator Paul S. Sarbanes, the chairman of the Senate Banking Committee, circulated a draft of comprehensive legislation responding to the Enron collapse that would impose significant new regulatory requirements on accountants and corporate executives and would go further than the S.E.C. in curtailing analyst conflicts of interest by protecting analysts from retaliation for making unfavorable stock recommendations.”

“Democrats in the House were more pointed in their criticism of the legislation. Two senior Democrats, Representative John J. LaFalce of New York and Representative Edward J. Markey of Massachusetts, issued separate statements saying that the regulations did not go far enough to curtail the abuses that have been uncovered by New York State investigators.”

“Eliot L. Spitzer, the attorney general in New York who is threatening to render the commission’s efforts irrelevant by imposing tougher ethics requirements on Merrill Lynch and others, called the new rules inadequate.”

“A somber mood pervaded a commission hearing this morning, stoked by lead editorials in The Wall Street Journal and The Financial Times strongly suggesting that Harvey L. Pitt, the chairman of the commission, step aside for repeatedly being insensitive to the appearance of possible ethical breaches. The headline on The Journal’s editorial, ‘Harvey Pitt’s Credibility,’ and its conclusion that the White House should have no confidence in him, cast a heavy shadow at the agency on a day in which Mr. Pitt had hoped to shine.”