Merrill Lynch Launches New Global Policy For Stock Market Analysts

by Carla Johnson, Investors Offshore.com

25 July 2001

The latest initiative by Merrill Lynch to forbid its equity analysts from buying shares in companies they cover, is part of a series of industry-leading moves by the firm to ensure the objectivity and independence of its research. With this step, Merrill Lynch has become the first major firm to go beyond industry standards that allow analysts to own the securities of the companies they follow.

Andrew J Melnick, director of Merrill Lynch Global Securities Research & Economics, explained: 'This move underscores Merrill Lynch's commitment to setting the standard for objectivity, independence and quality of research. It is intended to strengthen investor confidence in the process analysts follow.'

The new policy is global and effective immediately, but to ensure the fair and orderly implementation of the new policy regarding pre-existing holdings, Merrill Lynch will give analysts who own stocks in their sector a brief window of time during which they may choose one of three options:

• Elect to sell all their holdings, regardless of current investment ratings, to avoid the appearance of selective selling of their stocks.
• Transfer all securities positions in the stocks they follow to managed accounts over which they have no investment discretion.
• Maintain all positions but under new disclosure rules and stricter disposition policies.

The changes will also apply to members of the analyst's professional team including senior analysts, junior analysts and analysts' assistants, as well as their spouses and immediate members of their households.

In addition, Merrill Lynch also plans to release the findings of research reports regarding the existence of any equity position maintained by any analyst who has responsibility for a security discussed in the report. The disclosure will appear on the back page of research reports by 1 September, 2001, with the statement: 'One or more analysts responsible for the recommendation on this security maintains a position in this security.'

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