The Bank of New York says that BNY Jaywalk, its independent equity research arm, is to offer its research products to sell-side firms now required to procure and distribute independent equity research as part of the Global Research Analyst Settlement.
Under the Settlement, firms are obliged to offer independent research to their customers for every company that their in-house research divisions cover.
The BNY Jaywalk plan – dubbed The Independent Research Meritocracy – is to enable brokers to select these research reports from its pool of independent providers.
The Settlement also requires firms to appoint an “independent consultant” o choose the independent research providers, so BNY Jaywalk is making its services available to them as well.
“Historically, top independent
equity
research
firms have sold their research to institutional investors willing to pay for it and have been precluded from offering assistance to individual investors due to the high costs associated with their analysis,” explains a BNY Jaywalk spokesman. “With the introduction of the BNY Jaywalk solution, participating independent research firms will be able to offer sell-side brokerage customers cost-effective, quality research without
conflicting
with
the independent
research firms’ own institutional businesses.”
The Independent Research Meritocracy will also provide multiple reports for companies, including IPOs, where additional coverage is wanted.
“Our plan ensures that the individual customers of the sell-side firms win,” says John D. Meserve, president of BNY Jaywalk. “By utilizing The Independent Research Meritocracy, an independent research provider does not receive an outright contract that might cause or create the perception of complacency or conflicts of interest that may arise from significant payments for research product without a dynamic mechanism for quality control.
Instead, all eligible independent research providers have
the
continuous opportunity to earn revenue for distribution of their qualified analysis on a merit basis. In turn, the individual investor customers of the firms are always offered the best available selection of independent research from a growing, changing and diverse pool of independent analysis.”
As part of the technology already in place to deliver reports to the sell-side brokerages, BNY Jaywalk will provide a customized BNY Jaywalk Consensus report detailing the independent research community’s overall sentiment on every given company. This report, which shows the number
of independent research providers covering a company and summarizes
their
recommendations
over time, provides individual investors with a frame of reference to evaluate the differences between independent research and sell-side research found through other sources.
“The goal of the BNY Jaywalk Independent Research Meritocracy is to address both the letter and the spirit of the Global Settlement and the new regulations,” adds Joseph M. Velli, senior executive vice president of The Bank of New York and head of BNY Securities Group. “Research firms should be selected and rewarded upon the merits of their analysis and their recommendations. Our proposal accomplishes those objectives.”
The BNY Jaywalk network currently includes 65 independent research providers.