Credit Suisse limits analysts' holdings

The company will prohibit analysts from owning stock in the companies they cover, a plan similar to the one Merrill Lynch recently unveiled.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Credit Suisse First Boston is restricting stock ownership among its analysts, becoming the latest investment bank to take steps to avoid potential conflicts of interest among its soothsayers.

Stock analysts and bond analysts will be prohibited from owning stock in the companies they cover and must divest of any shares they own by Sept. 30, according to a new policy announced Wednesday.

"I have no complaints about this new policy," said one Credit Suisse First Boston analyst, who said she does not own stocks in the companies she covers and spoke on the condition of anonymity. "I think there is a conflict of interest if you own stock in the companies you cover.

"My only criticism is this policy should also apply to our counterparts on the banking side," she said. "Our constituents have the same information as the analysts have but no restrictions."

Earlier this month, Merrill Lynch announced a similar stock-ownership policy. The company is prohibiting analysts from owning stock in the companies they cover and has offered several alternatives for divesting of any current shares analysts own.

Wall Street analysts have been taken to task over this issue in recent months. A congressional hearing last month looked at potential conflicts of interests between research analysts, who are supposed to give unbiased stock recommendations and information to investors, and the investment banking side of their companies that underwrite initial public offerings and handle mergers and acquisitions of the companies they cover.

Meanwhile, earlier this month, the National Association of Securities Dealers proposed that analysts should disclose their portfolio holdings when appearing on TV to discuss stocks.

While Credit Suisse's policy did not address the TV issue, it covers some of the same ground from the congressional hearing. The new policy will affect roughly a third of its 360 equity analysts, as well as nearly half of its 160 bond analysts, a company spokeswoman said.

The investment bank will waive the policy in some cases, including if an analyst will face severe financial penalties such as extreme tax liabilities.

"CSFB's research analysts have an outstanding reputation for producing high-quality, objective research," Al Jackson, global head of equity research, said in a statement. "We believe the new policy will further demonstrate our ongoing commitment to support the integrity and independence of our research to all investors."

CSFB, in particular, has come under close scrutiny for some of its banking practices. The company has come under fire over its method of allocating shares in IPOs in which it served as an underwriter. Government regulators such as the U.S. attorney general's office, the Securities and Exchange Commission and the National Association of Securities Dealers have each announced investigations during the past several months over its allocation practices.

CSFB Chief Executive Allen Wheat resigned earlier this month and was immediately replaced with John Mack, a top executive at Morgan Stanley, who left that company earlier this year.