FSA tightens screw on abuse
INVESTMENT banks and stockbrokers are still producing biased research on corporate clients, the Financial Services Authority said today as it released its latest plans to clamp down on dodgy City practices.
From next summer a whole range of routine customs in the Square Mile are to be outlawed as part of the Europeanwide Market Abuse Directive.
New rules attempting to ensure that analysts are producing independent and objective research include:
Barring analysts from being involved in roadshows and marketing pitches for clients
Barring executives at firms who may have a conflicting responsibility from deciding on the content of research or supervising analysts or deciding on their remuneration
Barring analysts from making personal dealings or taking out spread bets or similar devices which are contrary to their stated research opinion on stocks
Barring firms from dealing in corporate client shares prior to the publication of research and from 'spinning' secret share allocations to favoured private clients and executives.
A spokesman for the FSA said: 'We have found in the past that there is a bias in analysts' recommendations toward clients. That would still be the case and there is room for improvement. That is why we are strengthening the [regulatory] framework.'
Banks and brokers are expected by the FSA to police potential conflicts of interest themselves by publishing and implementing a house policy on managing such conflicts.
The Market Abuse Directive becomes law next year.
