WASHINGTON - Political veteran Marc E. Lackritz is not budging in the flare-up with lawmakers over securities analysts' ethics.

Granted, last week was a tough one for the Securities Industry Association president by most people's standards. When the group issued a set of voluntary best practices meant to eliminate conflicts of interest among Wall Street securities analysts, Rep. Richard H. Baker received them like a little boy who had asked for a BB gun but unwrapped a water pistol.

On the eve of a hearing on analyst conflicts before the House Financial Services subcommittee on con capital markets, Rep. Baker complained that the best practices - which recommend that analysts disclose their own interests in stocks they rate and that their compensation be disconnected from investment banking deals - were "not the remedy that will satisfy the criteria of the committee."

Standing beside him, Ohio Rep. Michael G. Oxley, chairman of the full committee, said he hoped that the best practices were just "an opening gambit."

Things had not warmed up a day later when Mr. Lackritz and fellow witnesses heard from Rep. Baker and others that voluntary initiatives with no sanctions for noncompliance would not satisfy the committee.

To many in the audience, the lawmakers seemed to be sending a clear signal that it was time for the SIA to either start compromising or face the possibility of new laws governing analyst conduct.

But to Mr. Lackritz, who first came to Washington nearly 30 years ago as an assistant counsel to the Senate committee investigating the Watergate scandal, the lawmakers were saying something else.

"What I heard at the hearing is fairly healthy skepticism, and concern as to whether or not the industry is as committed as I know we are," he said in an interview Thursday. "That's not inappropriate for a congressional oversight committee."

Mr. Lackritz said that in his view, the industry's five-page statement of best practices deals with "every aspect of criticism that has been raised." All that remains is to convince lawmakers that, contrary to their first impression, the industry has already given them what they want.

What lawmakers want, Rep. Baker and others said, is to be sure that when Wall Street equity analysts recommend a stock, they are doing so solely on the underlying merits of the company issuing it.

In the weeks preceding the hearing, an increasing media focus on Wall Street research indicated that at some firms, analysts were compensated for attracting investment banking business, a practice that created an incentive for the analysts to issue "buy" ratings on potential clients. Others said analysts appeared reluctant to offend current or potential corporate clients, noting that during last year's market downturn fewer than 2% of recommendations were to sell stock.

But if you cut through all the noise, Mr. Lackritz said, the "ultimate goal" shared by Congress and the industry "is to ensure that the advice from the analysts is the best it can be."

"I don't think anyone is interested in creating some enforcement superstructure or some new bureaucracy to try to make sure every nook and cranny is filled and that every jot and tittle is written down," he said. "The proof of the effectiveness" of the best practices "will not be as much from the standpoint of an audit or even oversight. It will be from the standpoint of the quality of the advice. To the extent that the quality of the advice improves, my guess is that it will go a long way to meeting the concerns raised by Chairman Oxley and Chairman Baker."

Mr. Lackritz said that for best practices to be an effective check on the industry, three elements are necessary: leadership, competition, and the marketplace.

"We have all three of those forces at work to make these best practices very effective," he said. "We have leadership in the sense that we have sign-on from the CEOs of the top 15 underwriting firms. We have competition in the sense that if any firm isn't following these best practices, their competitors are going to be quite aggressive in putting that out to the marketplace. Third, with respect to the marketplace, we have investors looking at the quality of the advice they receive from analysts. If they don't receive good advice that helps them achieve their objectives, they are going to change firms."

The SIA's efforts to persuade Congress that its best practices are sufficient to maintain investor confidence in Wall Street analysts will begin in earnest early next month, when the organization's ad hoc Committee on Research Integrity is scheduled to meet.

Despite the political pressure, Mr. Lackritz gave no hints of compromise.

"I am sure they are going to discuss how to follow up to reassure Chairman Baker and Chairman Oxley that, in fact, the firms are taking this very seriously and implementing the guidelines," he said.

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