Were Merrill Suspensions A Bit OTT ?

Merrill Lynch clearly wants to be seen as whiter than the pure driven snow these days. But either the firm has gone overboard by suspending two well-regarded food retail research analysts or there is more to this story than meets the eye.

A Merrill spokesperson said that the analysts, Andrew Fowler and John Kershaw, had been 'placed on paid administrative leave....pending the completion of an internal review of recent issues pertaining to their coverage'.

The story that is out in the public domain is simply that the analysts received a call from someone in investor relations at J Sainsbury a few days back, who pointed out that their half-year earnings projections for the UK supermarket were a bit on the high side. After that call, the analysts downgraded their forecast.

Now the analysts came clean in their amended profit note that Sainsbury had called their original earnings projections too high. And, although UK regulator the Financial Services Authority is investigating this episode, the concern seems to be that Sainsbury itself could have been the party at fault - by selectively advising the Merrill boys and not telling the market as a whole at that stage about its likely half-yearly profit figures. Sainsbury denies selectively briefing the investment bank.

Merrill has said that the suspensions were 'standard practice' and did not imply wrong-doing on the part of the two analysts. Kind of guilty until proven innocent, no ?

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