Credit Suisse First Boston barred its stock and bond analysts Tuesday from buying the securities of companies they cover, following a similar move recently by Merrill Lynch & Co., as Wall Street firms scurry to quell rising doubts about their objectivity.
CSFB, the investment banking arm of Switzerland-based Credit Suisse Group, said its analysts must sell any investments in companies they cover by Sept. 30.
Brokerages and other Wall Street firms are attempting to spruce up their tainted image by issuing guidelines aimed at preventing conflicts of interest among their analysts, who have come under fire for continuing to issue laudatory “buy” recommendations even in the face of the stock market’s decline of the last year. Analysts are reluctant to issue “sell” recommendations, critics say, at the risk of irking investment banking clients or potential clients.
Members of Congress and investor groups have questioned whether Wall Street research is aimed more at promoting stock trading and cultivating lucrative banking deals than at benefiting investors.
The Securities Industry Assn., Wall Street’s trade group, announced new research standards in June and more than a dozen of Wall Street’s leading firms, including CSFB and Merrill, agreed to the guidelines.
Merrill went a step further July 10, saying its analysts no longer are allowed to buy stock in the companies they cover. Merrill also recently settled an arbitration claim with an investor who said he lost money by following the bullish advice of Internet analyst Henry Blodget, a settlement some observers say could prompt similar cases.
Congressional hearings on the research controversy in June raised the specter of new legal restrictions on the brokerage industry.
“The industry is under attack from consumers and regulators, and it’s clear the one thing it doesn’t want is more regulation,” said Jaime Punishill, who follows the brokerage industry for Forrester Research.
“Now that two of the heavyweights have taken this stance, other dominoes will fall,” he added. “More Wall Street firms will follow suit, and companies like Merrill will keep coming out with additional policies aimed at avoiding conflicts--real or perceived--so that they can say, ‘See, this is good research that you’re paying for.’ ”