New York’s move to put the kibosh on the advanced surveying of Wall Street analysts is expected to end similar reporting here in Canada as asset managers voluntarily rein in on efforts to win information ahead of competitors.
BlackRock has now agreed to end the practice of surveying analysts for their opinions on the specific firms they cover not only in New York but across the globe.
The survey process, which put BlackRock under heavy scrutiny, relied on advance information provided to them by analysts. BlackRock offered each analyst an incentive for their cooperation with the study. An accord released on Jan. 8 indicates that this money composed a significant portion of their salary.
New York Attorney General Eric Schneiderman, the man responsible for launching the probe, said that BlackRock’s approach to the situation “does not fit into the classic framework of insider trading. It’s something we’re now calling ‘insider trading 2.0.’ This is stuff that is not hard information. It’s just front-running what the analysts are saying.”
Schneiderman added that members of his team also spoke with representatives of other wealth management firms, and that they would be targeting the originators and receivers of the insider information.
BlackRock’s survey was designed to collect analyst opinions on whether or not there would be any surprises about their projected earnings. In addition, the survey also sought their views on the likelihood that a company they focus on would be acquired through a merger.
“This is a growing area of concern because it includes increasingly common practices,” said Schneiderman. The survey gives BlackRock and the targeted analysts “an unfair advantage over the rest of us and creates a two-tiered system that is bad for our markets, it’s bad for our economy.”
Historically, big Canadian players have themselves been accused of using similar methods to get a jump on the competition, although the New York developments are expected to increase the scrutiny regulators apply north of the border, say insiders.
That will likely accrue to the benefit of rank-and-file advisors, especially those at smaller independent firms.