Preserving Market Integrity

1. Introduction

The bull market of the 1990s both encouraged and concealed analyst misbehaviour. Never before had research analysts received so much negative media attention. At the centre of the media’s attention were the revelations of serious misconduct by some high profile analysts¹: namely Henry Blodget and Mary Meeker. While the majority of the allegations of analyst misconduct occurred overseas, mainly in the United States of America (USA), there were also allegations in Australia that conflicts of interest had compromised analyst research at one of Australia’s most prominent investment banks². Numerous press reports about a distinct lack of independence of research analyst recommendations resulted in overseas and local governments instigating investigations into the investment banking industry³. In Australia, the Australian Securities & Investment Commission (ASIC) launched a surveillance report on research analyst independence predominantly in response to public criticism and research by the International Organization of Securities Commission (IOSCO) . The aim of this report was to provide an overview of the regulatory and compliance issues affecting research analyst and investment bank relationships in Australia and to work as a factual basis for policy guidance in relation to the Government’s CLERP 9 legislation.