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To clean up a murky business, regulators have in effect killed off sell-side research by forcing fund managers to provide a clear budget for it to their investors. Previously this was a hidden cost in a bundled mix of services provided by investment banks that included payments for trading. As a result, asset managers, intend to cut spending on outside research provided by the banks by 30%
Equity analysts, it turns out, have never recovered from the days when Henry Blodget experienced his rise and fall. Among the most infamous of the late 1990s analysts, punting often worthless technology stocks in the dotcom bubble, the Merrill Lynch researcher became emblematic of the conflicts of interest riddling top Wall Street investment banks. Fast forward, and the bank research divisions are being regulated into touch. If this were indeed a tragedy, it would be a tragedy of commons, an example of how banks corrupted what was potentially a public good — ready access to information — in the pursuit of lucrative deals.
https://www.ft.com/content/db7d5d0a-e873-11e6-893c-082c54a7f539
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