Following on from the more stringent regulations now in place for research analysts in the US, new rules, designed to stamp out conflict-of-interest, will be introduced into the UK next year which look certain to result in analysts receiving smaller bonuses payments.
The Guardian reports that, from next summer, analysts will no longer be able to benefit financially as a result of any work undertaken on an investment banking deal. Analysts will be barred from attending roadshows and being involved in pitches for business. Their compensation will not be decided based on how much investment banking they bring in. In future, there will be a true 'Chinese Wall' up between analysts and investment banking clients to avoid even the appearance of possible conflict of interest.
Although the whole issue of conflicted stock research has not had as big an impact in the UK as the US, UK regulator The Financial Services Authority (FSA) felt that the new rules needed to be introduced. A spokesman for the FSA said: 'We have found in the past that there is a bias in analysts' recommendations towards clients. That would still appear to be the case and there is room for improvement. That is why we are strengthening the (regulatory) framework'.
In a related story, a US federal judge finally signed off Friday on the Securities and Exchange Commission's $1.4bn settlement with 10 Wall Street firms over alleged stock research conflicts.