Today, the SEC announced that it has filed a settled administrative proceeding against Charles P. Grom, a former Deutsche Bank research analyst, for allegedly certifying a rating on a stock that was inconsistent with his personal view. The SEC alleged that Grom's conduct violated the analyst certification requirement of Regulation Analyst Certification ("Reg AC").


According to the SEC, 

Grom certified that his March 29, 2012 research report about discount retailer Big Lots accurately reflected his own beliefs about the company and its securities.  But in private communications with Deutsche Bank research and sales personnel, Grom indicated that he didn’t downgrade Big Lots from a “BUY” recommendation in his report because he wanted to maintain his relationship with Big Lots management. 

Under the settlement, Grom will pay a $100,000 penalty, and will be suspended from the securities industry for a year. Grom neither admitted nor denied the SEC’s findings.


The SEC approved and adopted Reg AC in April 2003. Rule 501 of Reg AC requires securities analysts to include in their research reports a certification by the analyst that the views expressed in the research report accurately reflect the analyst’s personal views about the subject securities and issuers. Reg AC came on the heels of several high-profile SEC settlements with major Wall Street brokerage firms in cases where the SEC alleged that the firms had published misleading stock research.

Until today, things have been extremely quiet on the Reg AC front over the past 13 years. This is definitely the first time that I have ever written about Regulation AC and, for what it is worth, searches for "Regulation AC" or "Reg AC" on the Compliance Week site produce zero results. Indeed, even a Google search of "Regulation AC" produces very little of substance after the initial flurry of law firm memos in 2003.

Have there been any other cases filed under Regulation AC to date? Please let me know if you are aware of any. I am trying to confirm any past cases with the SEC, as well, and I will update this post if I receive any additional information. 

[UPDATE: An SEC spokesman told me that today's case is the first Reg AC case against an individual. There has been at least one past Reg AC action, which was filed against a firm in April 2008.]