Merrill deal on research notes
US INVESTMENT bank Merrill Lynch has caved in to stringent demands that its equity research reports fully disclose whether it expects to win fat fees as a result of them.
The move goes well beyond common practice in the investment banking industry and has sparked fears that a new standard on disclosure of conflict of interest is being set that Merrill's rivals will be forced to follow.
Merrill may yet face criminal charges after a 10-month investigation by New York State Attorney General Eliot Spitzer found numerous instances of what is being called 'rampant boosterism' on Wall Street.
Analysts at the bank were found to have been privately critical of stocks - some appeared to have been routinely castigated with the favoured in-house description 'POS' (piece of s**t) - yet still put their name to research urging clients to buy. In an interim accord, however, Merrill has agreed that from next week on its website and from 3 June on its research notes it will say whether it has earned fees in the previous 12 months from a company or expects to do so.
In addition, and more onerously, the bank will have to declare a breakdown of how many companies across its whole portfolio of research it recommends as 'buys' or 'sells'.
