The Securities Industry Association has endorsed a compilation of “best practices” for securities analysts in the United States.

Coming on the heels of a similar move to bring in rules governing the conduct of analysts in Canada, the SIA’s move may forestall the need for similar rules in the U.S.

The best practices address all aspects of the research department’s role within a brokerage firm to ensure that research is objective, independent, and ethical. The recommendations echo the ones proposed by the Canadian committee.

According to the recommendations, research departments should not report to investment banking or any other business units that might compromise their independence. Analysts should be encouraged to indicate both when a stock should be bought and when it should be sold, and management should support the use of the full ratings spectrum.

Analysts should not trade against their recommendations, and should disclose their holdings in companies they cover. As well, analysts’ pay should not be directly linked to investment banking transactions, sales, and trading revenues or asset management fees.

The best practices were compiled by an ad hoc committee of senior level research professionals from the association’s largest firms, and the chief executives of the 14 largest underwriting firms all expressed support for its work.

These 14 firms are: Bear Stearns; CIBC World Markets Corp.; Credit Suisse First Boston; Deutsche Banc Alex. Brown; Goldman Sachs Group Inc.; J.P. Morgan Securities; Lehman Brothers, Inc.; Merrill Lynch; Morgan Stanley; Prudential Securities Incorporated; Robertson Stephens, Inc.; Salomon Smith Barney; Thomas Weisel Partners; and, UBS Warburg.

“These recommendations embody our industry’s aspirations to strengthen ethical and professional standards for securities analysts, underscore broker-dealers’ commitment to the best interest of our clients, and buttress the overall integrity of the securities markets,” said the letter signed by the CEOs.

“Helping investors to identify appropriate investment opportunities and develop a financial plan is a vital function securities firms perform for investors,” said SIA president Marc Lackritz. “Analysts play a very important role by providing thoughtful and independent analysis for investors. These ‘best practices’ are part of many efforts to ensure that our industry abides by the highest professional standards.”

“Our most important goal is to maintain the public’s trust and confidence in capital markets and our industry,” said Mark Sutton, chairman of SIA’s board of directors and president of the private client group of UBS PaineWebber Inc.

“SIA’s endorsement of best practices for research demonstrates our commitment to achieving the highest levels of public trust and confidence in our industry. Behind every transaction or piece of advice given to an investor is one simple but important principle: the client’s interests come first.”