Brokers Ban Controversial Surveys


In the wake of BlackRock’s settlement with the New York attorney general over its surveys of security analysts, eighteen brokerage firms have agreed to bar their analysts from participating in asset manager surveys.  Separately, the quantitative hedge fund firm Two Sigma suspended its analyst survey earlier this month.

Brokerage agreements

The eighteen brokerage firms agreed to stop answering analyst surveys by “certain elite, technologically sophisticated clients at the expense of others,” according to New York Attorney General Eric Schneiderman. The interim agreements were part of the NY AG’s efforts to combat trading advantages secured by investors that win early access to potentially market-moving data.  The agreements cover all research on equities listed on US exchanges. The brokerages did not admit or deny wrongdoing.

Firms included in the deal are Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America Merrill Lynch, UBS , Barclays Capital, Credit Suisse, Morgan Stanley, Deutsche Bank Securities, Jefferies LLC, Sanford C. Bernstein, Macquarie Group, FBR Capital Markets, Stifel Nicolaus and its units Keefe, Bruyette & Woods, Thomas Weisel Partners, plus two independent research boutiques, Vertical Research Partners and Wolfe Research.

BlackRock’s settlement

BlackRock settled with the NY AG in January, agreeing to suspend surveys that “allowed it to obtain information from analysts that could reveal forthcoming revisions to their published views” according to the settlement. The firm agreed to pay $400,000 to cover costs of the investigation.

According to BlackRock’s NY AG settlement,  BlackRock administered surveys from March 2009 to January 2013.  During that period the surveys collected 60,000 analyst answers indicating a corporate earnings surprise, either up or down. For the year ending March 2010, BlackRock collected almost 8,000 answers regarding potential acquisitions, the attorney general’s investigation found.

Information gleaned from these and other questions was fed into trading algorithms designed by BlackRock’s Scientific Active Equities unit, a quantitative investment group acquired when BlackRock bought Barclays Global Investors in 2009.

Two Sigma

Earlier this month, Two Sigma, an $18.1 billion hedge fund, agreed to suspend its analyst survey program which it had originated in 2008.  Two Sigma said its survey was intended to obtain public information rather than nonpublic information about the companies the analysts cover. It was considered to be one of the largest such surveys.

The program had been developed with the help of lawyers and included mechanisms intended to ensure it complied with securities laws. As part of the survey, analysts’ responses went to compliance personnel at both the analysts’ firms and at Two Sigma. The hedge fund viewed its survey program as a more transparent alternative to unstructured and unmonitored communications with analysts.

The surveys were sent to about 1,300 analysts, and Two Sigma paid the firms of participating analysts.


Academic studies have suggested that selective research dissemination has been a rampant practice among major brokerage firms.  The SEC fined Goldman Sachs $22 million in 2012 for its ‘trading huddles’ after a Wall Street Journal article highlighted the practice.  Otherwise, selective dissemination has been a low regulatory priority.

NY AG Schneiderman, who first learned of the BlackRock survey through a New York Times article, has labeled the survey practices “Insider Trading 2.0” and has vowed to continue investigating.   However, absent additional media exposés, it is likely this topic will now revert to the regulatory back burner.


About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email:

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