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Wall Street Cracks Down on Free Sharing of Analysts' Notes

Photograph: Getty Images

Wall Street banks may have finally hit on a way to pinpoint the value of analysts and squeeze more money from their research: Stop making it so easy to share.

Bank of America Corp. has started embedding analysts’ reports into web pages, so it can more easily restrict access than with PDF files that are widely shared with people who aren’t paying clients, said Candace Browning, the firm’s head of research. It’s joining rivals Morgan Stanley and Citigroup Inc. in limiting access, and more plan to follow. The approach also makes it easier to track analysts’ readership and customize products for specific types of clients, according to bank executives and consultants.

“The sell side for years has had a model where it blasts out everything it produces,” said Michael Mayhew, founder of Integrity Research Associates LLC, which helps investors find the research they need. “This is an absolutely necessary next step because they have to understand what their customers are consuming.”

The main goal is to restore profitability to Wall Street research following a slew of new regulations in the past 15 years, including rules spurred by allegations that analysts touted stocks under pressure from investment bankers. But it also may provide key data in a debate that erupts every bonus season and job cull: How important, really, is analyst research to winning trades and other deals?

‘Another Chapter’

“This is simply another chapter in the unending quest for revenue clarity in institutional equity trading,” said Brad Hintz, a former chief financial officer of Lehman Brothers Holdings Inc. who last year ended a 14-year career as an analyst. Traders often win the credit for generating commissions on transactions that analysts feel they deserve, he said. “Maybe this time, technology will finally provide the answer to that age-old question: ‘Whose commission dollar is this?’”

(For Hintz’s full portrayal of the fight over commissions, click here.)

The first big hit to modern stock research came in a 2000 rule requiring companies to disclose material information to all investors at once, making it harder for analysts to break market-moving news. Then a scandal led to the 2003 walling off of analysts from investment...