UPDATE 3-Wall St banks lose court ruling on hot news ban

* Federal appeals court in New York issues stay

* Theflyonthewall.com argued ban cost it clients

* Loss for Bank of America, Barclays, Morgan Stanley
(Adds comments from three banks, paragraphs 8-9)

By Jonathan Stempel

NEW YORK, May 20 (BestGrowthStock) – Three Wall Street banks
suffered a legal setback when a federal appeals court in New
York put on hold a ban on financial news service
Theflyonthewall.com Inc from quickly reporting “hot news” about
their analysts’ research.

The ruling by the U.S. Second Circuit Court of Appeals was
a defeat for Bank of America Corp’s (BAC.N: ) Merrill Lynch unit,
Barclays Plc (BARC.L: ) and Morgan Stanley (MS.N: ) (Read more about the money market today. ).

These banks had won an injunction on March 18 from U.S.
District Judge Denise Cote that required Theflyonthewall.com to
wait two or more hours before publishing their research.
Wednesday’s appeals court ruling lifts that restriction.

The Second Circuit also granted Theflyonthewall.com’s
request for an expedited appeal. It will hear arguments at the
earliest available date after July 26, when briefs are due.

Bank of America, Barclays and Morgan Stanley have argued
that Theflyonthewall.com had been getting a “free ride” by
systematically misappropriating analyst research, including
upgrades and downgrades that can instantly move stock prices.

Cote had ordered Theflyonthewall.com to wait until 10 a.m.
to report research issued before the market opens, and at least
two hours for research issued thereafter.

The Summit, New Jersey-based company has said these limits
have cost it subscribers and threatened its survival, because
waiting to publish can render the research stale.

Morgan Stanley declined to comment specifically on
Wednesday’s ruling. Spokeswoman Sandra Hernandez said the bank
wants to end “the instantaneous stripping of our content” and
“the free-riding off our research franchise,”

Bank of America spokesman Bill Halldin and Barclays
spokesman Mark Lane declined to comment. Glenn Ostrager, a
lawyer for Theflyonthewall.com, was not immediately available
for comment.

Dow Jones & Co, a unit of Rupert Murdoch’s News Corp
(NWSA.O: ), last month filed a similar lawsuit accusing financial
news service Briefing.com of republishing its news, often
word-for-word, without permission or “journalistic effort.”

The cases raise issues of copyright infringement and the
media’s First Amendment rights under the U.S. Constitution.

The case is Theflyonthewall.com Inc v. Barclays Capital Inc
et al, U.S. Second Circuit Court of Appeals, No. 10-1372.

Stock Market Basics

(Reporting by Jonathan Stempel, editing by Dave Zimmerman)

UPDATE 3-Wall St banks lose court ruling on hot news ban