FI.Chapter3 - . I i. = ft/lillt .-;-*-,:;"...

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Unformatted text preview: . I i. = ft/lillt .-;-*-,:;" 5or.4,le,emy Kohi "tonl Olortroie! HecryHoid," Fodune, De.embe, 30, 2002, 73; Je,emy Kohn a^d Ne50^ D Sc,wor:, 'ANewlnveno,E,o?lo'Fodune,Novem6er25,2002,35-3SiDovdRynec/ii,'ThePriceolBefgRgnt. F.dne.fe6 ory4,2AAl, 126 lr'l,Ne3onD S.hwoiz ondlercmy Kohi,'C.n This B!lRutr A9o n," Forune, De.embe,30,2002,63 32, oid Alyndo wheol, "Holl ol Shome Meiil iyichroEigirh D.roio,y,' fodune, Ap,i 29 2002 23 Fica*ar*!a! 5ateaeteffits. *as9 FEew. affid Y*xes hcn evaluaiing a coupany, wlto crn you tr st? The analysts ai top brokeragc firms rate compa nics, using lerlns such as buy, hold, or sell. \4,r\ b( \,'u thrrl.. )^u c.,n rru-t lrr( rrJiin!:.. crrcF rl,(\L ,rr'.rl)\l- dre l r-hl\ rr.ri,,.d .,,J hdre ,r',,*. l,' gr..|l ddld "ources. Th|lr\ rg.rin. \4h(rr ih( m.t| |t r \',rs in 'he r,rddl, ''r.,','rg .iv.,Jy de.lirc ir rl-. ,drlv 2LruU-. these analysts nade 7,033 buy recomnen- tl. . ior,.. bLr .,nly </ -rll-. Wl dt , oL,ld p ,-'i- bl\ ..,,r." -,,ch.,primi-,rl Hoh "boul rh, ir own Personal compensation and their o$'r Iirrrr.'pn,fir-. r.,rlrer tlr.,n ll,.ir . icr', b",1 interests? Mosi brokerage firms are mc]n- bers of a corporntc family that includes an '\,.,rnrLni b.,,,1. li rr un,rly. I \F. d ,or" pany a ncgative ratilg, the company will lrlf rl. Ir!u.rrnpr,l b.i'rlirg bu-irc'. lo ,r banking firm thai gives it a better raiing. To pr.!"nr rhi:.i, l'.li,'r .rndlv-t. dre prf-.-,r e.l r.' '{f.,rir f'.'n, n,.,t'ng lo\v. otte|l.i\,-. rirg,. l,rdLfJ .,r.rl\ ,1. s l,o d"r'l /nll In lrI..rre ,'ftr r lrred. -u, h r. M lt V.'r".for- nFrl) ,,t Cr,'lil <'Li.-F frr-' Bo-t,',,. {h,, gave honest (nnd subscqueltly shown to bc nccuratr) ncgative ratlnts. In fact, at CSI'U, the analysis actuallv reported b invcshrlcnt bankers, and intemal c-mlils fcvcnlcd thaL .n.rlysts were often replaced k) korp invest nront bankhg clients happy. At Mcrrill L),nch, e mail revealc'd in ol,en In'.re di.lurbing .irur ion An,ly.l\ r,.n.i.- tc'ntly gate posiii\.e raiings to firms, but then bLasted the firms in intfrnal c-Inails. Fof cramplc, analysts gave one conp:rny a ,1r., r$ bI\ r,rlind bul \^ ru.ts ll,dl lh c,'rn pnn)' was "a piece of junk" in their intcrnal c-mrils. That's actrially bcttcr than ilre c-rnail for another posiiivcly rak d conpant u,hich was callcd a "piece of s t." Anothc'r conpany {ras raicd "Neutral jn Lhc short term/Mhimum 40% appreciniion long tcrm," but e mails staied thai thcrc'wns noth- iu8 interesting aboui the coDPan)', "c'xcept b,lnking fccs." Ne('York atiornev Seneral Eliot Spit,acr broutht action againsi a nlLmber of Wall Strcct firms, (-hich eventrially scttled tor llj1.4billion (but'hichdidn'istop thomany suiLs brought against ihe firms by individ ual invesbrs who lost money allcr iciing on ih analysts' recommendations). Thcsc lcgal actions are getiing some results. For exanrplc, CSFB has reassigned anal)rsts so that lhe)' rcport b its gcneral co nsel instead of its secu- rities division, and Morgan Stanle!,'s analysts have actually...
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FI.Chapter3 - . I i. = ft/lillt .-;-*-,:;"...

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