Part I of this Article provides an overview of research analysts and their basic functions, including a discussion of sell-side analysts' role in the market's recent boom and bust. Part II examines the conflicts of interest that have plagued sell-side research, and Part III reviews the Regulatory Actions that are meant to address these conflicts. In Part IV, the author will make the case for encouraging, rather than lessening, investor skepticism in sell-side research and will explain why the Regulatory Actions are not likely to improve the performance of sell-side analysts. Finally, Part V will offer a simpler proposal to address the sell-side analyst issue. While there may not be a solution to the "maybe not" problem, the information gap between institutional investors and retail investors regarding the weaknesses of sell-side research can be eliminated, which would allow retail investors to benefit from the value of sell-side research while also granting them the opportunity to properly protect themselves from its weaknesses. Akin to the Surgeon General's warning for cigarette manufacturers, this Article proposes that sell-side analysts and their firms be required to prominently include, with all research, a short and clear warning from the United States Securities and Exchange Commission ("SEC"), regarding the historical weaknesses of sell-side research.
Denver University Law Review
John L. Orcutt, 'Investor Skepticism v. Investor Confidence: Why the New Research Analyst Reforms Will Harm Investors," 81 DENV. U. L. REV. 1 (2003)
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