A voluntary code of conduct proposed Thursday is intended to restore investors' faith in research.
By Associated Press
Published March 12, 2004
NEW YORK - Groups representing publicly traded companies and the stock analysts that report on them said Thursday they have agreed to a code of conduct aimed at ensuring that individual investors receive unbiased research on corporations.
The new voluntary standards, proposed by the Association for Investment Management and Research and the National Investor Relations Institute, would keep public companies from "punishing" analysts who write negative reports, while requiring analysts to disclose whether their research was independent or actually funded by the company covered in a report.
"Investors should be apprised as to who's writing the research and if they're being paid for it," said Louis Thompson, president and chief executive of NIRI. "And they should be confident that the analyst had enough access to the necessary information for an informed opinion."
The securities industry has been beset by a number of scandals in which analysts were unduly biased in favor of a company because their firm performed investment banking services for the company in question. In January, a European court ordered Morgan Stanley to pay $38.5-million in damages to LVMH, maker of Louis Vuitton handbags and Moet champagne, for allegedly biased research on LVMH aimed at aiding rival Gucci, a Morgan Stanley investment banking client.
For their part, analysts frequently complain of being closed out of the information loop after writing negative reports on a company.
"A company should welcome the person with a negative view. They should provide them access, and try to get the story straight," said Jonathan Boersma, vice president for professional standards at AIMR. "Instead, we see companies closing off top executives to the analysts, publicly berating analysts and calling their integrity into question."
