Speaking with my ex-analyst hat on, the settlement announced today is a canard. How shall I count the ways?
Consider these four points:
- Telling brokerage execs that they can’t even implicitly consider investment banking revenues when paying analysts is like telling packaged good executives that they can’t even implicitly consider detergent sales when paying IT employees
- If analysts aren’t allowed to go on road shows with investment banking, who, exactly, among the motley crew is is going to tell the company’s story? The i-bankers? Yeesh
- Forcing firms to contract with “no fewer than three independent research firms” for the next five years is a full-employment act for boutiques (many of which are, of course, excellent and can use the exposure); but it is also heavy-handed interference in how brokerages are run
- Far from creating a “bright line” between analysts and investment banking, as NYSE Chair Dick Grasso suggests, the settlement creates an unnecessary and costly dark chasm
This thing will have unintended consequences galore, not least of which is that does investors few favors.