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Amid a federal probe into the role that investment banks played during the recent equity bubble, a congressional panel will convene a hearing to look into public concerns about disclosure by analysts, as well as the potential for conflicts of interest among underwriters doling out shares of hot IPOs. The hearing, planned for June, will be chaired by Richard Baker, a Louisiana Republican who presides over the House subcommittee that oversees capital markets. Witnesses have not yet been announced. The hearing originally was scheduled to focus on disclosure of stock analysts and questions about why they have so many more “buy” ratings than “sell,” particularly as the markets dropped last year. But a spokesman said Baker has decided to broaden the scope of the hearing to include issues that have been raised in conjunction with investigations by the Securities and Exchange Commission and the U.S. Attorney’s Office into the allocation of shares in initial public offerings during the peak of the market boom. Members of Congress have been hearing from constituents concerned about the collapse of market valuations during the past year, particularly in the dot-com sector. But to some observers, it isn’t clear that Congress has a role in addressing those concerns. “Traditionally, this is not the sort of issue Congress has weighed in on,” said securities lawyer Geoffrey Stewart of Washington, D.C.’s Jones Day Reavis and Pogue. “The law has delegated that responsibility to the SEC, which in turn has re-delegated responsibility to self-regulatory organizations, such as the National Association of Securities Dealers and the New York Stock Exchange. Any attempt to try to legislate in this area would be a departure from past practice.” But with more Americans invested in capital markets than ever before because of the growth of retirement funds and the ease of investing directly via the Internet, members are hearing more clamoring from their constituents. “If there have been changes in the way Wall Street operates in the last decade, as more and more laypeople are getting involved in investing in the financial markets, it may be the opportune time for Congress to translate this information for people back home,” said Michael DiResto, Baker’s spokesman. “It’s not set up to be any kind of blame game or witch hunt,” DiResto said of the hearing. “Most investors know the risks. They don’t look for government to come up with a quick-fix answer. It’s time Congress looked into any potential for some guidelines on the fullest disclosure possible.” Meanwhile, the Securities Industry Association, the trade group representing the securities industry, is establishing its own ad hoc committee to look into these issues. “There are questions that have to be looked at in terms of examining best practices for the industry,” said SIA spokesman Dan Michaelis. “Certainly, the conflict of interest concern is covered by federal regulation and the exchanges have their own rules. We’ll be looking into that. But generally, we would say it is effectively policed.” Related Articles from The Industry Standard: After the Bell: When Cisco Speaks, Will the Markets Still Listen? Betting on Cisco Labor Pains Copyright (c) 2001 The Industry Standard

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