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Wednesday, 31 July, 2002, 10:30 GMT 11:30 UK
City watchdog targets share tippers
FSA webgrab
The FSA is aiming for tighter rules
The Financial Services Authority, the UK stock market regulator, has set out possible ways preventing City analysts from talking up stocks in which they have an interest.

The FSA said it may force analysts to provide full details of their relationship with the companies they research.

The watchdog also suggested forcing them to label their reports as advice, promotion, or marketing material.

The move follows reports in the US that some Wall Street analysts issued glowing reports on companies they privately disparaged so as to win lucrative investment banking business from them.

Investor pain

During the 1990s internet boom, many US investors backed firms which later went bankrupt on the strength of the reports, racking up heavy losses.

In May, Wall Street brokerage Merrill Lynch paid $100m to settle an investigation into misleading share tips led by New York prosecutor Eliot Spitzer.

The Securities and Exchange Commission, the FSA's US counterpart, has put forward tough new rules under which analysts would have to personally certify their research.

Star analysts

The FSA pointed out that analysts in the UK have a less influence than in the US, where share tippers such Merrill Lynch's Henry Blodget or Morgan Stanley's Mary Meeker achieved near-celebrity status during the late 1990s.

But it highlighted research showing that UK analysts issue twice as many "buy" recommendations on firms with which they have an established business relationship as they do on companies they are unconnected with.

"It is difficult to see how the differential in 'buy' recommendations can be justified on objective grounds," said FSA chief Howard Davies.

The FSA said will listen to the City's reaction to its latest report before fine-tuning its proposals in the autumn.

See also:

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