Conflicts of Interest in IBanking
This question is for IB analysts:
Have you felt any internal pressure to provide favorable recommendations (i.e. buy) in order to retain or spur business (i.e. underwriting)?
I ask in response to a discussion I had with a person familiar with the industry about the wealth of buy ratings in comparison to sell ratings and why that might be.
IBD and Equity Research don't work together. Buy/Sell ratings are produced by the Equity Research team.
Understood. I should rephrase:
For an equity research member who works under the auspices of an IB, does any influence trickle down to you? Or is there a healthy independence given to research?
Though IBD and Equity Research don't work together, I would imagine that IBD functions of an IB constitute a rather influential part of overall business.
Please forgive my questions. I'm a student trying to gain some direction on what area I want to work my way into.
Actually there are some serious laws against this - the SEC requires pretty strict separation. You can read more about "Chinese Walls" on Wikipedia.
An anecdote - when I did my SA, there were a few times we wanted to ask our equity research guys that covered our industry a few questions. We weren't even allowed to have a conference call with them without our internal lawyers on the phone.
Not to say it doesn't happen clandestinely at some banks, but there is typically at least the appearance of impartiality.
There are also a few paragraphs on conflicts of interest at integrated securities firms here: http://en.wikipedia.org/wiki/Investment_banking#Possible_conflicts_of_i…
This stopped quickly after the dot com bubble, to my knowledge...
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