Merrill Lynch has issued to all of its brokers a memo that contains "talking points" to address potential questions and concerns from clients on the investigation of its research practices by New York’s attorney general.
The memo essentially informs brokers to deny all allegations made against Merrill and to stress that analysts' compensation is not directly linked to the investment bank.
"It’s what was expected," says a rep. "This is no surprise to get the memo and it’s no surprise as to its contents."
Here is a condensed version of the talking points:
There is no basis for allegations. Merrill believes that they’re wrong;
A fair review of the facts shows that Merrill has conducted its research with integrity;
The allegations takes the e-mails out of context in an effort to show that investment banking had undo influence on the firm’s research opinion, when in fact these e-mails prove nothing of the sort;
Merrill has been a recognized leader in the practice of protecting the integrity and independence of research;
Merrill’s research department does not report to the investment banking division and analysts’ comment not tied directly to the success of investment banking;
Merrill states prominently on the front page of its research reports that it may have investment banking or other business relationships with the companies it covers.
"For some brokers, it’s not a bad idea to have the memo at their disposal, but more me it’s senseless," says one rep. "I don’t have a lot of clients asking me questions because they know me and they know my practice. They know I’m all about them and their success. I have nothing to worry about."
Another rep says of the talking points: "To essentially deny the whole thing is foolish. There’s no need to make it worse, to compound the problem. But my clients aren’t asking questions because they weren’t affected much; they’re invested in managed money accounts or mutual funds, rather than individual stocks."