|Tuesday, December 9, 2003
Nancy A. Condon
NASD Fines and Suspends Banc of America Securities Analyst for Overstated Research Reports and Providing Advance Notice of Price Targets and Ratings
Washington, DC – NASD announced today that it fined and suspended Andrew Hamerling, a former research analyst at Banc of America Securities LLC (BAS), for issuing research reports with ratings, target prices and substantive discussions that were contrary to his personal opinions. NASD found that Hamerling issued six research reports regarding four issuers - SBC Communications, Inc., Williams Communications Group, TyCom, Ltd., and Qwest Communications International Inc. that violated NASD rules.
Before issuing a September 2001 SBC report, Hamerling analyzed the company's earnings per share, concluded that the earnings did not adequately reflect the company's operating results, and prepared a draft report with that analysis. NASD found that Hamerling did not publish this negative research report because he was concerned that SBC would not attend an upcoming Banc of America Securities conference and that SBC would deny him access to information in the future. NASD found that the published September Report failed to disclose negative facts about the company as well as Hamerling's actual views in violation of NASD rules.
NASD also found that Hamerling published buy ratings for SBC with a $51 target price, while he believed the stock price would decrease and, in emails, recommended that it be shorted. For example, Hamerling responded to a hedge fund manager's inquiry, by stating:
…short SBC. May sound a bit crazy, but it [SBC] has nothing fundamentally sound going for it…"
NASD also determined that Hamerling gave advance notice of his stock ratings, price targets and substantive research to representatives of issuers that he followed. This practice furnished potentially market-sensitive information prior to public release and violated NASD's just and equitable principles rule as well as BAS' own internal policies.
NASD imposed a 9-month suspension and a $125,000 fine payable upon his reassociation with any NASD-registered firm. Details of the violations found relating to research on Williams Communications Group, TyCom, Ltd., and Qwest Communications International Inc. can be found in the Hamerling settlement document. NASD's investigation of research and supervision issues at Banc of America Securities is continuing.
NASD also announced that it took action against several other firms and individuals for violations involving misleading research reports and press releases
All four cases were settled, and the respondents did not admit nor deny the allegations, but consented to the entry of findings by NASD.
"These enforcement actions are part of NASD's continuing efforts to police research analyst conflicts of interest in the wake of the global settlement reached with 10 firms in April of this year," said Mary L. Schapiro, Vice Chairman of NASD.
Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling NASD's BrokerCheck. NASD makes available BrokerCheck at no charge to the public. In 2002, members of the public used this service to conduct more than 2.5 million searches for existing brokers or firms and requested almost 200,000 reports in cases where disclosable information existed on a broker or firm. Investors can continue to access this service by calling (800) 289-9999.
NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web site at www.nasd.com.