Securities Industry Association (SIA)

The Securities Industry Association (SIA) is the Wall Street trade association representing the interests of the stock market industry in the U.S. political and regulatory environment. The Securities Industry Association was established in 1972 through the merger of the Investment Banker’s Association and the Association of Stock Exchange Firms. Included in its 700 members are investment banks, broker-dealers, and mutual fund companies. Following is the Securities Industry Association’s mission statement.

Recognizing their fundamental role in the continued
growth and development of the capital markets, as well as
their responsibility to issuers and investors, Securities Industry Association member
firms hold these values: adherence to ethical and professional
standards; commitment to the best interests of
clients; and exercise of unquestioned integrity in business
and personal dealings in the industry and within the firms.

Some issues on which the Securities Industry Association has taken advocacy positions include federal securities transaction fees, regulation of capital markets, Regulation FD (full disclosure), and the creation of “best practices” guidelines for stock-market analysts. In 2001 the Securities Industry Association responded to criticisms that analysts are pressured to recommend stocks of companies their company is soliciting investment banking services business from (typically bond issues and stock offerings) by creating a series of guidelines. Some of the Securities Industry Association’s best practices include the following.
• “corporate governance. Research should not report to investment banking; it should also not report to any other business unit in a way that compromises its integrity.
• Recommendations should be transparent and consistent. . . . A formal rating system should have clear definitions that are published in every report or otherwise readily available. management should encourage analysts to indicate both when a security should be bought and when it should be sold . . . and . . . should support use of the full ratings spectrum.
• Assessment of compensation. While compensation will inevitably vary with market conditions and a firm’s overall profitability, a research analyst’s pay should not be directly linked to specific investment banking transactions, sales and trading revenues, or asset management fees . . .
• Personal interests should be disclosed. Analysts should disclose whether they or members of their households hold direct ownership positions in securities they cover . . .”
Part of the basis for criticism of the role of security analysts is how few sell recommendations they offer. Even with a significant stock-market decline, that began spring 2000, in 2001 only 1 percent of analysts’ ratings were sell recommendations.