BlackRock agrees with NY attorney general to end analyst surveys

Thu Jan 9, 2014 12:49am EST
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By Karen Freifeld

Jan 9 (Reuters) - BlackRock Inc, the world's largest asset manager, agreed to end its analyst survey program worldwide, as part of an agreement reached Wednesday with the New York Attorney General's office.

The agreement stems from an investigation by New York Attorney General Eric Schneiderman into the early release of Wall Street analyst sentiment, which can move markets.

BlackRock agreed to pay $400,000 for the cost of the investigation, but no fine or penalty, and to cooperate in any investigation related to the probe.

"BlackRock deserves credit for recognizing the need for reform when it comes to the dissemination of information that can move markets," Schneiderman said in a statement. He called the agreement "a major step forward in restoring fairness in our financial markets and ensuring a level playing field for all investors."

The Analyst Survey Program asked many of the world's most prominent analysts at dozens of brokerage firms a series of questions related to the companies they were covering, according to the agreement.

Although BlackRock's position is that the purpose of the survey program was to quantify the analysts' publicly available insights, Schneiderman found evidence that the program's design allowed it to capture "non-public analyst sentiment that could be used to trade ahead of the market reaction to upcoming analyst reports," according to the agreement.

The analysts were surveyed on a quarterly or monthly basis, depending on where they were located geographically, and the program obtained hundreds of thousands of responses.

The U.S. surveys would ask analysts to answer questions on a scale of 1 through 9, and the responses were averaged, aggregated and converted into quantitative return forecasts.   Continued...