SEC moves on from Wall Street research settlement
More than twenty years after Wall Street’s research scandals prompted strict controls on how analysts and bankers interacted, the regulatory landscape looks very different. Modern rulemaking, shifting business models and international pressures have steadily reshaped how equity research is produced and paid for.
Against that backdrop, the US Securities and Exchange Commission has now agreed to unwind the remaining undertakings in the Global Research Analyst Settlement. The decision removes settlement based requirements that applied to 12 major broker dealers, with Commissioner Mark Uyeda arguing that they have become outdated and costly, and that current rules offer a more appropriate framework.
The original settlement was born out of the dot-com era, when concerns grew that optimistic research was being used as a tool to win investment banking mandates. It imposed detailed structural, conduct and disclosure obligations without going through a formal consultation process, always with the expectation that subsequent rulemaking would take over.
Today the concern is less about exuberant research and more about the lack of it, particularly for smaller and mid sized issuers. Easing obsolete constraints may help, but rebuilding coverage will also depend on the quality of underlying information. Structured, machine readable disclosures in XBRL are doing an increasing share of the work, giving investors and data driven tools a way to analyse companies even when traditional research is thin on the ground.
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