Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Mums the Word: Firms Agree to Restrict Early Access to Analyst Reports
Author: Dan Brecher
Date: March 17, 2014
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Several prominent Wall Street firms have reached an agreement with New York regulators to end the practice of cooperating with surveys that provide early access to analysts’ opinions.
New York Attorney General Eric T. Schneiderman requested the deal as part of his investigation into the early release of analyst sentiment to preferred investors, a practice he has dubbed “Insider Trading 2.0.” Schneiderman argues that the surveys put investors at a disadvantage by giving traders a “sneak peak” at reports before they are released to the general public.
Last month, Schneiderman announced a similar agreement with BlackRock, under which the asset manager agreed to end its practice of surveying analysts regarding the firms they cover. According to the NY Attorney General, the design, timing, and structure of the surveys allowed BlackRock to obtain information from analysts that could be used to front-run future analyst revisions.
The latest agreements cover the survey respondents, Merrill Lynch, UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, and Deutsche Bank Securities Inc. The firms have agreed to terminate their participation in any survey worldwide that relates to companies listed on U.S. exchanges.
“At my request, these firms have agreed to stop a practice that can offer an advantage to powerful clients at the expense of others,” said Schneiderman. “Our markets will only be fair and healthy if everyone plays by the same rules, which is why we will continue to take action against those who provide unfair advantages to elite traders at the expense of the rest of us. I applaud these firms for their leadership and cooperation.”
As the latest settlement highlights, insider trading — in all its potential variants — continues to be a top priority for state and federal regulators. Firms are advised to stay on top of current legal developments and seek the advice of experienced counsel regarding how best to achieve compliance.
If you have any questions about the settlements or would like to discuss how to best protect your company from insider trading allegations, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.
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