BlackRock — the world’s largest asset manager — has agreed to permanently discontinue the practice of systematically surveying Wall Street analysts for their opinions on firms they cover.
BlackRock is ending this practice worldwide, not just in the United States.
BlackRock has also agreed to continue cooperating with the New York Attorney General’s broader investigation into what the Attorney General has called “Insider Trading 2.0.”
“Our agreement with BlackRock to end its global analyst survey program and cooperate with my office’s Wall Street-wide investigation into the early release of analyst sentiment is a major step forward in ensuring fairness to our financial markets and ensuring a level playing field for all investors,” said Attorney General Eric Schneiderman. “The concept that there should be one set of rules for everyone is critical to protecting the integrity of our markets, which is why my office will continue to take action against those who provide unfair advantages to elite traders at the expense of the rest of us.”
Prior to this agreement, BlackRock operated what is believed to be the largest analyst survey program in the world, soliciting answers from analysts that could reveal the direction of their next published report.
Analyst reports are understood to be market-moving information because their recommendations have broad impact on clients’ decisions and the direction of the market.
The BlackRock survey contained a number of questions worded to capture analysts’ views regarding management, competitive position, earnings, and other important aspects of covered companies.
The Attorney General’s Office determined that the design, timing, and structure of the surveys allowed BlackRock to obtain information from analysts that could be used to get ahead of, or, as a BlackRock document put it, “front-run” future analyst revisions.
A key component of the settlement with BlackRock is its continued cooperation in the Attorney General’s broader investigation into the early release of analyst opinions to investors who use the data in complex trading programs.
In a speech delivered at the Bloomberg Markets 50 Summit in September 2013, the Attorney General outlined his concern about the early release of market-moving data to preferred investors in a practice he dubbed “Insider Trading 2.0.”
In the speech, he highlighted his interim agreement with Thomson Reuters to end the company’s practice of selling early access to consumer confidence data to high-frequency traders. He also expressed concern regarding brokerage firm analysts who answer surveys that provide traders with a sneak peek into forthcoming analyst reports.
The investigation into BlackRock’s analyst survey program was based in part on information provided by confidential whistleblowers who came forward to express grave concerns about BlackRock’s survey program and about similar practices industry-wide.
In the course of investigating Wall Street analyst surveys, the Attorney General’s Office obtained hundreds of thousands of pages of documentary evidence related to BlackRock’s analyst survey program and took testimony from BlackRock employees and others.