Eliot Spitzer talks to Investorside Members


New York – Eliot Spitzer was the luncheon speaker at the Investorside Members Day Conference, held yesterday at the Cornell Club in New York. The address was informal, being structured more like a fireside chat between Mr. Spitzer and Investorside President Richard Leggett.  There was also a good deal of audience participation encouraged by Mr. Spitzer.

 Initially, Mr. Spitzer noted that the number of players in the settlement, which included the SEC, the NYSE and the affected bulge bracket banks had the feel of the Paris Peace Talks as far as number of viewpoints and interest groups was concerned. He noted that the settlement was and never could be perfect, but that he hoped that it had been somewhat effective. Since the settlement was crafted, Mr. Spitzer has been off doing other things, so it was remarkable that he had such a firm grasp of the issues that lead to the settlement, such a high degree of recall about the facts of the settlement, and such a deep knowledge about research in general.

 He noted that the settlement was not about the performance of research, it was about reducing the conflicts that were inherent in the sell-side model. To prohibit the sell-side from doing research was thought to be too drastic. The rationale Mr. Spitzer applied to the settlement was to bring the issue out into the light, give the independent research providers a window of opportunity to showcase their services and then to return the research industry back into a competitive market model. If independent research had proven its value, it would persist.

 Mr. Spitzer then asked the crowd of independent research providers how the settlement had worked for them.  As a group, the research providers reflected that a lot of the settlement money went to the largest research firms, that having independent research at side-sell institutions often conflicted with internal research at least culturally, that the settlement only forced the banks to offer, and not to promote, the independent research, and that while they had taken strides to replace the settlement revenues over the term of the settlement the recession had hit just as they were about to execute new deals with clients.  Mr. Spitzer said that research content was a notoriously difficult product to sell outside of banking.

 Then the conversation turned to hedge funds and the Galleon debacle.  Mr. Leggett asked if this was a game changer for the hedge fund industry. Mr. Spitzer said that he was supportive of the hedge fund industry in that it promoted activism of investors.  He also said that the Galleon affair ought not to initiate a flurry of new regulation, but that regulators ought to enforce the laws already on the books as they apply to front running and insider information.  When asked about the expert network industry, he said that he did not know enough about it to comment, but that that perhaps their needed to be a greater articulation about the definitions of what is public vs. non-public information as well as material vs. non-material information. In addition, how what measures were required to avoid front running concerns.

 Finally, Mr. Spitzer was asked what he would be doing in the current financial climate if he were still the Attorney General of New York. He said he would not be dealing with the financial market at this point, since there were already too many chefs in the kitchen. He said he would be looking for the next big thing that was not widely known and trying to bring that issue to light.  

 For more information about the Investorside organization and the benefits of membership contact Investorside Executive Director, Pat Shea at 877 834 4777 or email at pshea@investorside.org.


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