The SEC sided with a bunch of investment banks that want to loosen conflict-of-interest rules put in place after the dot-com bubble popped, the WSJ reports.
Here's the backstory.
In the aftermath of the Internet mania, it became clear that some research analysts who worked at investment banks had publicly praised certain stocks while privately acknowledging that the stocks were dogs.
They did this because investment banks make money partly by helping companies sell stocks and bonds to the public. So, the banks figured, it would be good for business if the research analysts said good things about the stocks of clients and potential clients.
The SEC cracked down. A bunch of I-banks paid a $1.4 billion settlement and agreed to create a rigid separation between their analysts, who issued reports for public consumption, and their investment bankers, who worked with companies on IPOs and other financial issues.
But when the banks recently asked a federal judge to loosen the rules limiting communication between a bank's investment bankers and analysts, the SEC sided with the banks.
The judge rejected the request, which he said "would undermine the separation between research and investment banking."
This morning's WSJ also notes that the rules from the settlement, which apply to a dozen investment banks, have not been applied industry-wide, creating a two-tiered system.
The SEC says the settlement was not supposed to be applied industry-wide, and that other rules have been put in place to prevent inappropriate interactions between research analysts and investment bankers.