Securities and Exchange Commission Chairman Arthur Levitt Jr. yesterday rapped companies and Wall Street analysts for what he described as a relationship that panders to each other's business interests at the cost of general shareholders.

In a speech delivered to the Economic Club of New York last night, Levitt said that an SEC review of the relationship between companies and the analysts who follow them revealed that the analysts tended to protect "the business relationship at the cost of fair analysis."

Companies, Levitt said, continued to play up to Wall Street's expectations, especially on such issues as quarterly results, even if it meant tinkering with accepted financial reporting norms. Such a "gamesmanship," he said, was encouraging managers to "cut corners and look the other way to boost stock price."

Levitt also decried the practice of selective feeding of nonpublic information by companies to analysts. He said that the SEC would consider proposing rules that "close the gap between those in the so-called 'know' and the rest . . . in the public."

To ensure fair play, Levitt said, companies should allow everyone to dial into their quarterly conference calls, which typically are open only to analysts and select business reporters, and they should post transcripts on the Internet. "This selectiveness is a disservice to investors and it undermines the fundamental principle of fairness," he said.

Levitt also called upon the self-regulatory organizations to consider whether investors are clearly told when the analyst's firm has an investment banking or advisory relationship with the company being recommended.

"We cannot settle for boilerplate disclosure, cloudy language that masks a firm's position, or small-type disclaimers at the end of the document," Levitt said.

CAPTION: Arthur Levitt Jr. says the company-analyst relationship hurts investors.