The debate over Wall Street adviser Joseph Granville and his now-widely-known newsletter shifted yesterday from how much impact he has on the market to how properly he wielded that power.

Securities and Exchange Commission sources said that the SEC is looking at -- but not investigating in any formal sense -- the dramatic change in investment advice by analyst Granville and the equally dramatic retreat in the market that followed his change of heart.

Fellow investment advisers, some of whom may have been chafing over the fact that Granville called the market shift and they didn't, questioned the ethics of Granville's flip-flop, particularly since the market adviser has become such a factor that his recommendation to sell may itself have disadvantaged customers who got his earlier advice to buy.

SEC officials refused to comment specifically on the Granville case, but noted in general that simply giving two different customers radically different advice -- so long as no fraud is involved -- appears not to raise any legal problems.

"Speaking in general, if John Smith, investment adviser, sends out two pieces of conflicting advice and he's not trying to pull a fast one, he's probably within the law," said one SEC official yesterday.

Assuming that such an adviser fully disclosed to potential clients that his advice might change and that he didn't give one customer one piece of advice knowing he would give another customer the opposite recommendation, the adviser probably would be within acceptable standards, said Joel Goldberg, associate director of investment management in the SEC.

Some sources said that Granville's advertising and other material indicate the risk run by subscribers to the cheaper of his two services. A recent advertisement in Barron's urging investors to "put us to work for your own stock market trading" did not include such a warning, simply mentioning that there are two services, a $250 newsletter (46 issues a year) and the Granville Early Warning Service which also includes instant advice by telegram and telephone and sells for twice as much. However, a legend on Granville's newsletters warns that all opinions are subject to change without notice.

Some 12,000 customers receive the newsletter; approximately 3,000 customers get the early warning service.

Granville could not be reached for comment.

Whether Granville might have

Much of the debate on whether what Granville did was right, as opposed to legal, centered on Granville's own clout in the market. Analysts attributed the terrific impact of Granville's telegrams and telephone calls, in part, to his earlier track record which has earned him many followers.

With increasing pressure from the industry and the SEC on investment advisers to make public information that could shift markets before advisers act on the information themselves, the question was: Should Granville have disclosed, at least to his other customers, that he was about to change his mind?