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To: marek_wojna who wrote (85238)	5/8/2002 2:21:55 PM
From: long-gone	Read Replies (2) \| Respond to of 116823

Requiem for an Honorable Profession Sun May 5, 3:08 PM ET By GRETCHEN MORGENSON The New York Times It is hard to pinpoint when it happened, because culture changes incrementally. But Stefan D. Abrams, the chief investment officer for asset allocation at Trust Company of the West, dates the shift in Wall Street's research culture to about 1996. The mergers (news - web sites) business was in full bloom, bringing in huge fees for securities firms and the promise of more to come. The dot-com and telecommunications boom was starting to build, and with it came the prospect of many initial public offerings more gold for Wall Street investment banks. The stock market was embarked on the biggest run-up of all time, and individual investors with easy online trading were joining professional traders in droves, suggesting even more business, albeit at low margins, for the nation's brokerages. That is when, Mr. Abrams argues, the major firms figured out how valuable a popular, high-profile analyst could be in grabbing a bigger share of those lucrative investment banking fees. That is when analysts showed exactly how much they had become salesmen and saleswomen for their investment banking departments in their routine communications. In one 1999 memo titled "Managing the Banking Calendar for Internet Research," for example, Henry Blodget, Merrill Lynch's then-renowned Internet analyst, outlines an 85 percent banking, 15 percent research schedule for the coming week and adds, "Every day I get a call or two from bankers I don't yet know with interesting opportunities." Mr. Abrams said, "Forty years ago, when I joined this business, to be an analyst was an honorable job." No more. Exactly how perfidious the culture had become at some Wall Street firms during the stock market mania began to sink in only last month, when Eliot L. Spitzer, the New York attorney general, released hundreds of documents, including e-mail messages, written by Merrill Lynch analysts deriding companies whose shares they were simultaneously recommending to investors. Merrill said that the conclusions in the affidavit were allegations, not fact, and that the e-mail messages had been misconstrued and taken out of context. But Merrill is hardly alone in the criticism it has received. Mr. Spitzer's investigation is expected to turn up evidence of analysts behaving badly at other firms, too. Interviews with former analysts, each of whom has worked at a variety of large Wall Street firms, along with internal evaluation and compensation documents from many of them, provide even more evidence that in recent years research analysts were driven not to provide the best advice for investors but rather to excel in two areas: banking and ranking. They were supposed to generate investment banking fees by producing positive research reports on companies and to attain the highest ranking on the annual analyst rankings published each fall by Institutional Investor magazine. The two goals were related, former analysts say. Without a No. 1 ranking on Institutional Investor's list the result of a beauty-contest poll on analysts among portfolio managers investment banking deals were likely to migrate to firms whose analysts were atop the list. The most powerful analyst, company executives knew, could drum up investor interest and get the highest price for their stock or bond offering or for a company in a merger (news - web sites). Ranking high on Institutional Investor became paramount to analysts not only because their firms demanded it, but also because their paychecks grew exponentially when they secured a top post in the poll, reflecting the investment banking fees the analysts helped attract. "I've worked at several Wall Street firms, both institutional and retail, and none actively encouraged their analysts to do objective, critical research and protect their noninvestment-banking clients' interests," said Gary(cont) story.news.yahoo.com