N.Y. moves to prevent elite access to insider information
Eighteen Wall Street firms have agreed to a voluntary ban on analyst surveys amid concerns that the surveys might give some investors an advance peek at market-moving information.
The move is part of New York Attorney General Eric Schneiderman’s efforts to prevent some traders from getting inside information before it becomes publicly available, a crusade against what he calls "insider trading 2.0."
On Wednesday, JPMorgan Chase, Goldman Sachs Group and 16 other brokerages agreed to stop their analysts participating in surveys performed on behalf of elite clients.
The concern is that surveys of analysts could give away their sentiments on particular stocks, giving an advance notice of potential stock movements before they include the information in publicly released notes.
“Our markets will only be fair and healthy if everyone plays by the same rules, which is why we will continue to take action against those who provide unfair advantages to elite traders at the expense of the rest of us,” Schneiderman said in an emailed statement yesterday.
Last month, Schneiderman persuaded BlackRock Inc., the world’s largest asset manager, to end a program in which it systematically surveyed analysts about companies they cover.
According to statements cited in the Jan. 8 accord, analysts had an incentive to provide answers to BlackRock because it was a large client that made up a “huge chunk” of their pay.
The surveys tap analysts’ views on management performance, prospective earnings and whether a company might be acquired in a merger.
Similarly, Schneiderman’s office had expressed concern over a Business Wire practice of selling direct access to news releases to high-speed trading firms.
Business Wire, a business news service owned by Warren Buffett’s Berkshire Hathaway, issues releases about corporate earnings, mergers and other issues that can lead to a change in stock price.
Buffett and Business Wire CEO Cathy Baron Tamraz decided to stop licensing direct feeds from Business Wire to high-speed traders after talking to the high profile New York attorney general’s office.
"Business Wire's decision to voluntarily step forward and stop selling its clients' information directly to high-speed traders is a tremendous victory for our effort to eliminate advance trading on market-moving information," Schneiderman said in a statement after the change was announced.
Last September, Schneiderman said in speech that trading on early access to publicly released information is a "new form of market manipulation" that requires action from regulators.
