Call it the research rat squad.
That’s the plan an important industry organization has come up with to combat the wave of scandals that have scarred The Street’s research pros this year.
“We cannot act without knowledge of a violation . . . If you become aware of unethical conduct by a fellow member, please let us know,” said Thomas Bowman, president and chief executive of the Association for Investment Management and Research (AIMR), in a two-page missive to the group’s 60,000 members.
The campaign by the well-regarded group – best known for awarding the coveted Chartered Financial Analyst to pros who pass a series of rigorous exams – didn’t sit well with some members.
“I fear there’s a potential for abuse,” said Michael Cohen, director of research at Pacific American Securities and a CFA candidate. “People could report on others for competitive reasons rather than purely for unethical conduct.”
But AIMR, based in Charlottesville, Va., needs help ferreting out the rats in its membership.
“We can’t do it all. We need you to be our eyes and our ears,” said AIMR spokesman Rich Wyler, referring to the not-for-profit’s membership.
The ultimate discipline AIMR can undertake is to suspend or revoke a member’s CFA. In the past five years, though, just 12 members have been suspended and only one has had a membership revoked, Wyler said.
And former high-flying analysts Jack Grubman, Henry Blodget and Mary Meeker, under multiple probes by state and federal regulators, are not AIMR members.
In fact, only 15 percent of sell-side analysts – those at the root of the analyst conflicts of interest probes – are AIMR members, Wyler said.
“We can’t discipline analysts who are not members,” Wyler sniffed.