Investor skepticism v. investor confidence: Why the new research analyst reforms will harm investors

Academic Article


  • Excerpt: Part I of this Article provides an overview of research analysts and their basic functions, including a discussion of sell-side analysts' role in the market's recent boom and bust. Part II examines the conflicts of in- terest that have plagued sell-side research, and Part III reviews the Regu- latory Actions that are meant to address these conflicts. In Part IV, the author will make the case for encouraging, rather than lessening, investor skepticism in sell-side research and will explain why the Regulatory Ac- tions are not likely to improve the performance of sell-side analysts. Fi- nally, Part V will offer a simpler proposal to address the sell-side analyst issue. While there may not be a solution to the "maybe not" problem, the information gap between institutional investors and retail investors re- garding the weaknesses of sell-side research can be eliminated, which would allow retail investors to benefit from the value of sell-side re- search while also granting them the opportunity to properly protect them- selves from its weaknesses. Akin to the Surgeon General's warning for cigarette manufacturers, this Article proposes that sell-side analysts and their firms be required to prominently include, with all research, a short and clear warning from the United States Securities and Exchange Commission ("SEC"), regarding the historical weaknesses of sell-side research.23
  • Authors


    Publication Date

  • 2003
  • Has Subject Area

    Published In


  • IPO
  • Regulation Analyst Certification
  • Regulatory Actions
  • Sarbanes-Oxley
  • brokerage houses
  • brokerages
  • investing
  • investment banking
  • investors
  • Start Page

  • 1
  • End Page

  • 77
  • Volume

  • 81
  • Issue

  • 1