New York – The WSJ is reporting that on August 21st of last week Lehman Brothers sent a note to its clients admitting that sections of a report it published on March 3rd of this year “closely resemble content produced by Bernstein research last summer”. The note also contains an apology to Sanford C. Bernstein. The report in question concerned the semiconductor industry, and more specifically a virtualization workload forecast. The Journal quotes Lehman’s letter as saying that “the material was not sourced to Bernstein and was used without the firm’s permission.”
The integrity of sell-side research has been a hot topic ever since the Global Research Analyst Settlement of 2002 and this incident certainly won’t help to quell the heat. Former CSFB investment banker, Frank Quattrone has gone on record stating that he feels that the research settlement has ultimately hurt the country by forcing Wall Street analysts to focus their research solely on larger firms in hope of gaining themselves notice in the Institutional Investor. This focus makes it increasingly harder to find investment research on smaller public companies, which ultimately makes their lives harder.
The settlement has also forced sell-side research to pay for itself, a fact which has forced many companies to run their departments more cheaply and has as such lowered the talent pool available. The recent plagiarism case may be an indication of this lack of quality. The fact that the incident happens at Lehman is somewhat surprising, as they are one of the investment banks which has successfully beefed up its research department in the recent years.
The incident comes at a bad time for Lehman as they are currently trying to sell off a number of assets and dumped around $140 billion of holdings in the first quarter. They are also shopping Neuberger Berman. Lehman Brothers, founded in 1850, is a bulge bracket investment bank that offers a wide range of financial services, including equity and fixed income research. The firm’s research products are generated by a team of over 600 analysts. Over the last three years, Lehman has increased the size of its research department and has consistently been ranked as a top research provider by various surveys, including the vaunted Institutional Investor annual ranking.
Sanford Bernstein is a fundamental research shop. They cover equity, fixed income, investment strategies and wealth management services. Bernstein began in 1967 primarily serving family money investments. Bernstein operates within Alliance Bernstein LP and currently has over $99 billion under management. The asset management firm believes that investment research is the key to a successful investment program. Alongside the clearly fundamental approach, the firm utilizes economic research and portfolio strategy to round out its research offering.
The original article can be found here.