The Securities Analysts' Conflicts Of Interests & The Civil Liability

Recently, as the scandal of Merrill Lynch and Enron have become the truth, the securities analysts' conflicts of interest have been the focus around the world. There is little doubt that the securities analysts have made great contribution to the securities market. Their commitment in data collecting and analyzing largely enhance the efficiency in pricing in the market. The independence and objectivity of the securities analysts become the key to their effectiveness and efficiency. However, the independence and credit of the securities analysts are questioned by the market for the existence of conflicts of interest, which also easily makes the investors to lose their confidence. And it even damages the development of the securities market. Hence, how to take charge the securities analyst's conflicts of interest, which makes the securities analysts not only play the role in information conduits but also promote the communication of securities market, has been a question for all securities legislation in the world.The conflicts can be divided into three general categories. First, analyst and their firms may have an ownership interest in a company that is the subject of the analysts' report. Second, analysts may be subject to pressure because of the firms' business interests. Third, analysts' reports may be affected by efforts to maintain superior access to corporate information.In order to avoid the existence of the securities analysts' conflicts of interest, the major methods adopted by the mature securities markets are setting up "Chinese Wall" in the securities company to avoid the flowing of the interior information and the in formation exposure system for the securities analysts' conflicts of interest.As a legislation system, firstly, "Chinese Wall" requires the multiservice securities firm to separate the functions that maybe incur the conflicts of interest to avoid the flow of interior information and reduce the opportunities of the securities analysts to get the interior information. Secondly, it also provides a powerful weapon to the securities analyst, which limits the legal responsibility of the securities analysts from the conflicts of interest.The object of the information exposure system is to put the credit of the securities analysts under the judgment of the market. "When all the important information that could effect the decision of the investors is exposed to the public, the market would have reaction and efficient adjustment".Meanwhile, as the supplement of the "Chinese Wall" and information exposure system, most countries' securities legislations also set up the civil liabilities of the securities analyst, which acts as the compensation to the investors' loss incurring from the swindle of the securities analyst. The civil liabilities of the securities analysts include the fake statement civil liabilities and internal trading civil liability.