SAN FRANCISCO -- The harsh glare of congressional hearings on sell-side analysts led the

Securities Industry Association

to adopt "best practices" guidelines last month. Tuesday,

Merrill Lynch

(MER)

announced its analysts will no longer be able to buy shares in the companies they cover.

But other employees of brokerage firms, notably traders and strategists, haven't been forced to live so cleanly.

Take, for example, Brian Finnerty, managing director and head trader at

C.E. Unterberg Towbin

. With his gravelly voice and "old school" New York demeanor, the trader makes for good TV and is a frequent guest on

CNBC

,

Fox News

,

CNNfn

and other stations.

But "good TV" has obscured the fact Finnerty has often recommended stocks and not disclosed that his firm has financial ties to them.

From July 25, 2000, through Tuesday's appearance on "Today's Business," Finnerty recommended shares of

Kopin

(KOPN) - Get Report

at least five times on

CNBC

, according to archives on the network's Web site. He also recommended the stock on

CNNfn

on Aug. 23, 2000.

The problem is not so much that Kopin is down 55% since July 25, 2000 (although that is a problem). The problem is that C.E. Unterberg Towbin has done underwriting for the maker of silicon-alternative semiconductor wafers and also makes a market for the firm's stock.

After repeated phone calls, Finnerty declined to comment without first seeing a preview of this story.

TheStreet.com's

policies forbid showing previews of stories. The trader also passed on a follow-up question as to why he would talk about stocks in which he has a conflict of interest: "You write what you want and I'll comment after the fact," he said. (And if he does comment, I will report it here.)

Citing time and staff constraints, Thomas Duggan, general counsel at C.E. Unterberg Towbin, said he couldn't respond "to whether disclosure has been made and whether discussions on TV are in keeping with internal policies we may have with regard to analysts' comments on television."

Duggan wouldn't comment on the firm's internal policies, saying they are the purview of the firm's chief compliance officer, who is traveling overseas (presumably somewhere without phones).

Brokerage firms often say pleasant things about stocks they have underwritten; it tends to help them pitch for future banking business, which generates hefty fees. Additionally, the market maker in a stock profits from increased activity in an issue.

Investors have recently learned to be suspicious, but there was a time when the mere mention of a stock on TV could generate significant interest. Kopin shares rose nearly 23% with more than 5 million shares trading the day of Finnerty's July 25 appearance. Other factors may have contributed to the volume and price spikes, but 3.1 million shares traded the previous day (when the stock fell 5.9%) and less than 3 million traded the day after his appearance (when the stock shed 11.9%).

Finnerty never mentioned C.E. Unterberg Towbin's connections to Kopin in Tuesday's appearance, according to a transcript of the show. Nor did

CNBC

run a disclosure while he was on air. Transcripts of the earlier shows are not available.

CNBC's

disclosure policy says: "If you are an analyst, you will disclose any current or recent (previous year) investment banking relationship between your firm and those companies whose securities are discussed during your appearance."

The specific use of the term "analyst" is key and wasn't lost on Unterberg Towbin's counsel. "I don't believe he's considered an analyst," Duggan said.

Filling the Cracks

On July 2, the

National Association of Securities Dealers

approved for comment a

resolution requiring "analysts and other brokerage employees to disclose potential conflicts of interest when they recommend a security during a television interview or other public appearance."

The inclusion of "other brokerage employees" is significant, but the proposal is not yet a rule. Thus, it didn't apply to Finnerty's frequent recommendations of Kopin.

Finnerty hit for the cycle of indiscretion in a Feb. 24 appearance on "Bulls & Bears" on

Fox News

, during which he recommended

New Focus

(NUFO)

. He also recommended the stock on

CNNfn

on May 1.

C.E. Unterberg Towbin has done underwriting for the maker of optical components, makes a market in its stock, and a former managing director of C.E. Unterberg Towbin, John Dexheimer, sits on New Focus' board of directors. Dexheimer was a managing director at C.E. Unterberg Towbin from March 1990 through December 1998 and is now president of

LightWave Advisors

, a venture capital and business development adviser.

Furthermore, C.E. Unterberg Towbin Advisors sold its 170,000-share stake of New Focus sometime during the first quarter, according to

BigDough.com

.

Other stocks the trader recommended on

CNBC

that his firm has done underwriting for and/or makes a market in include

Proxim

(PROX)

on July 25, Oct. 31 and Nov. 9, 2000;

Silicon Image

(SIMG)

on Aug. 25, 2000; and

Interliant

(INIT)

and

TMP Worldwide

(TMPW)

in November 2000.

Because he's a trader and not an analyst, Finnerty wasn't likely asked about underwriting relationships and other conflicts in any of the aforementioned. But as a managing director for C.E. Unterberg Towbin, his financial interests are directly linked to the firm's. Clearly, viewers would have been well served to know about the conflicts of interest.

Paul Capelli, a spokesman for

CNBC

, conceded it is largely up to the guests to make the proper disclosures.

"We don't consider ourselves to be the police," he said. "We have guidelines and expect our guests to follow them. There's a mutual understanding for guests that don't follow our guidelines

that the opportunity for

them to return and appear on

CNBC

is in jeopardy."

A spokeswoman for

CNNfn

said the network asks its guests to disclose whether they own a given stock that's going to be discussed on air. She said she did not know the network's policies regarding underwriting relationships and market making.

At press time, a

Fox News

spokesman had yet to provide requested information about the network's disclosure policy.

For all the lip service being paid to disclosure, some on Wall Street are still playing by the "old" rules.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.