Once again a Wall Street brokerage has been caught red-handed passing off puff pieces on the stocks and bonds of companies it has an investment banking relationship with as unbiased “investment research.” In the latest case, a Deutsche Bank analyst was caught publishing a positive rating on a stock he covered that wasn’t consistent with his outlook.
That shouldn’t come as a surprise to savvy readers of this site. The big Wall Street banks have and always will be in the business of distributing securities. Wall Street research is nothing more than a euphemism for advertising. And even when big bank analysts aren’t inflating their ratings to win investment banking business, they are focused first on their top clients and only then on the retail public.
Retail investors are a tool of the big banks. They are a dumping ground for undersubscribed IPOs and a money pool that, as you will read below, can be used to nudge prices in the direction that allows their biggest revenue generators (hedge-funds) to profit.
Retail investors will never get a fair shake at any of Wall Street’s big banks. For unbiased advice and research, the only place to go is the registered investment advisory channel where advisors must act as fiduciaries as opposed to agents (salesmen).
Business Insider has all the juicy details.
The SEC on Wednesday charged a former Deutsche Bank research analyst with publishing a rating on a stock that was inconsistent with his own view.
Charles P. Grom, a senior analyst focused on the consumer sector,agreed to settle the charges by paying a $100,000 penalty. He will be suspended from the securities industry for a year.
According to the SEC, Grom in March 2012 issued a “Buy” rating on the stock of the discount retailer Big Lots, even though he thought it should be downgraded.
Grom had been bullish at one point, but after hosting a roadshow with Big Lots management and Deutsche Bank clients, he turned negative. He called a Deutsche Bank trader responsible for trading Big Lots stock, and the trader promptly sold a bunch of stock. He called several clients, whom he told to sell stock.
The next day, however, he published a report giving the stock a “Buy” rating, though his note was titled, “Not All Is Good In Buckeye Land.”
You can read the rest of the article here.
Jeremy Jones, CFA
Latest posts by Jeremy Jones, CFA (see all)
- Yellen Still Can’t Understand What the BIS has Known for Years About Inflation - September 22, 2017
- Is This the Beginning of the End for Fossil Fuel Energy? - September 22, 2017
- Is Intense Investor Optimism a Sign of the End? - September 20, 2017