Fidelity & The Global Research Settlement


New York – Anticipating the end of the Global Research Settlement, Fidelity has revamped its independent research offerings, and its changes reflect larger trends in investment research. Last week, Fidelity announced a new release of which features an altered lineup of research providers. New providers focus on governance, forensic accounting, ESG (environmental , social and governance), technical analysis and multi-asset investment strategy.

Fidelity has provided third party research to its clients for decades. Initially it was equity research from Standard & Poor’s and Lehman. Then, when the Global Research Settlement was announced in 2002, the firm began to expand its research platform. Fidelity did not want the brokerage firms which were being forced to offer third party research using the Settlement as a competitive weapon against it.

Fidelity added a variety of providers that were also being considered by the independent consultants appointed to purchase third party research on behalf of the brokerages participating in the Settlement. Fidelity licensed research from Best Independent Research (a consortium of Thomas White, Ativo, Channel Trend, Columbine and Ford), Argus, Zacks, and Thomson’s research offering (which was powered by Gradient). It also had research from Decision Economics, Allen Sinai’s economics firm, and MarketEdge, a technical analysis provider which provides technical analysis overlay on S&P’s equity research.

In selecting research providers, Fidelity paid attention to the dictates of the Global Research Settlement, even though the Settlement did not pertain to Fidelity. The regulators administering the Settlement had a bias toward qualitative, analyst-driven research, thinking that this type of research would be most comparable to the proprietary brokerage research that the third party sources were meant to supplement. However, another dictate of the Settlement was that there should be at least one alternative provider for every stock covered by the brokerage firms, so coverage became an important criterion in selecting third party research firms.

For this reason, quantitative, model-driven firms became eligible, so long as they provided written reports. The Best Independent Research consortium was a group of quant research firms that grouped together to fund the addition of written research to their product offerings. Similarly, Zacks expanded its research offering combining quantitative models with an analytic overlay.

Like the independent consultants administering the Settlement, Fidelity also wrestled with the issue of how to monitor the performance of third party research. However, Fidelity went beyond the Settlement, providing more transparency on performance than the Settlement regulators and independent consultants, which did not publicly release any performance statistics on the third party research selected. Fidelity, on the other hand, added performance analysis from Investars and StarMine to allow users to track the performance of the research firms it provided.

With the latest release of, Fidelity is moving beyond the Settlement, adding more diverse research than the narrow strictures of the Settlement permitted. Fidelity is not bound by the Settlement, so it can do what it chooses. Most importantly, it has focused on adding research which helps investors form a ‘mosaic’, similar to the broader trends in investment research. The mosaic includes non-standard analysis such as governance and ESG research. Similarly, technical analysis, which was scorned by the Settlement, provides particular value in trading markets such as the current market environment.

The new release features the following recently-added firms: Audit Integrity, which provides forensic accounting and governance research, KLD Research & Analytics, an environmental, social and governance (ESG) specialist, The Hightower Report, technically oriented strategy research covering multiple asset classes, and Recognia, a technical analysis firm. Also included are scorecards on each of the research firms supplied by Integrity Research, providing performance analysis and commentary on research generally.

Fidelity’s moves signal the enduring interest in third party research post-Settlement, but also presage healthy changes from the regulatory framework of the Settlement.

To see Fidelity’s release click here.


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