GARP Research Adopts Investment Protection Principles & Urges Disclosure of Investment Banking Conflicts

GARP Research, an independent provider of institutional equity research, notes it has abided by stricter rules than the Merrill Lynch principles since its founding in 1995. GARP believes the recent settlement between NY Attorney General Eliot Spitzer and prominent Wall Street firms does not remove investment banking conflicts, and that increased disclosure of payments to such firms by money managers would aid investors. GARP endorses the stricter covenant of the Investorside Research Association, of which it is a member.

TOWSON, MD (PRWEB) February 15, 2003 - GARP Research & Securities Co. and GARP Research Corporation announced today that each has adopted the Investment Protection Principles as put forth in terms of the agreement between Merrill Lynch & Co., Inc. and the New York State Attorney General Eliot Spitzer dated May 21, 2002 (also known as the Merrill Lynch Principles). GARP Research & Securities Co. is a newly formed broker-dealer in registration and is affiliated with GARP Research Corporation, a leading provider of independent institutional equity research since 1995.

William W Baker, CFA, President of both firms, stated, We are delighted to endorse the Investment Protection Principles. As an investment advisor providing independent institutional equity research, we have been abiding by them since our inception in 1995. In June 2002 GARP Research Corporation became a member of the Investorside Research Association (www.investorside.org), whose founding charter goes far beyond the Merrill Lynch principles. Member firms must not be in the investment banking or company consulting businesses, and must primarily be paid by investors as opposed to the companies that are the subject of research coverage.

While we are encouraged by the actions of regulators in 2002, we believe that serious conflicts of interest remain between investors and firms who simultaneously publish research and collect fees from the companies they cover. We believe that money management firms should disclose annually the percentage of commissions paid to research providers who do not have this conflict, as certified by the Investorside Research Association.

Furthermore, we believe that investment companies, pension funds, and those with fiduciary responsibility for other such pools of capital should require such disclosure from their investment managers and should encourage them to have a preference for research from broker-dealers and investment advisors who have certified the absence of such conflicts of interest through membership in the Investorside Research Association. We do not believe that the Investment Protection Principles accomplish this because analysts remain compensated from general corporate funds which are inevitably linked to client companies that provide lucrative investment banking fees. While the Investment Protection Principles make a sorely needed tentative first step toward removing the most egregious violations of investor rights, they codify and provide legal protection for implicit cooperation between a cost center, research, and the profit engine of broker dealers, corporate finance."