Writing securities research : a best practice guide PDF
Preview Writing securities research : a best practice guide
ffirs.indd iv 7/2/10 7:34:03 AM Book reviews/press comments for the fi rst edition (2007) “. . . is very timely . . . a good analysis . . . a highly readable and incisive book . . . provides a clear guide to industry insiders . . . and a detailed understanding for those who read research”. Geoff de Freitas, Shanghai Business Review, May 2008 “. . . sharp, readable and timely book . . .” The Correspondent, the magazine of the Foreign Correspondents’ Club of Hong Kong, Sept/Oct 2007 issue “. . . defi nitive best-practice guide . . . a very readable and engaging book fi lled with sound advice and workable recommendations”. Keith Hall, China Daily, April 13, 2007 “. . . excellent book”. R. Sivanithy, Singapore Business Times, April 2, 2007 “. . . an essential textbook for securities professionals around the world”. Johannes Ridu, Malaysian Business/New Straits Times, April 1, 2007 “It ought to be mandatory reading for courses focused on securities research”. MoneyLife, India, July 5, 2007 “Extensive case studies are also well-used and interesting. This is a sound and generally useful piece of work for all investment market professionals and, indeed, investors everywhere”. James Rose, Corporate Governance Asia “. . . plenty of practical examples”. CPA Australia, June 2007 ffirs.indd i 7/2/10 7:34:02 AM Endorsements of the fi rst edition (2007) There is a strong need for this book . . . This book is relevant in any set ting. It will equip analysts with many useful tools to help them achieve success. Mark Mobius, President of Templeton Emerging Markets Fund This guide to doing it properly is an obvious selection for the bookshelf of anyone who aspires to offer investment advice and a fi ne reference for anyone who receives such advice. Jake van der Kamp, Financial Columnist of South China Morning Post At last, here’s a comprehensive yet easy-to-read guide explaining all the best practice principles involved in writing securities research. It is full of useful information . . . I highly recommend it. Anthony Espina, Chairman of Hong Kong Stockbrokers Association . . . essential reading for all people involved in writing securities research. Andrew Leeming, author of The Super Analysts ffirs.indd ii 7/2/10 7:34:03 AM Writing Securities Research A Best Practice Guide Second Edition ffirs.indd iii 7/2/10 7:34:03 AM ffirs.indd iv 7/2/10 7:34:03 AM Writing Securities Research A Best Practice Guide Second Edition Jeremy Bolland John Wiley & Sons (Asia) Pte. Ltd. ffirs.indd v 7/2/10 7:34:03 AM Copyright © 2010, 2007 Jeremy Bolland Published in 2010 by John Wiley & Sons (Asia) Pte. Ltd. 2 Clementi Loop, #02–01, Singapore 129809 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons (Asia) Pte. Ltd., 2 Clementi Loop, #02–01, Singapore 129809, tel: 65–6463–2400, fax: 65–6463–4605, e-mail: [email protected]. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought. Neither the authors nor the publisher are liable for any actions prompted or caused by the information presented in this book. Any views expressed herein are those of the authors and do not represent the views of the organizations they work for. Other Wiley Editorial Offi ces John Wiley & Sons, 111 River Street, Hoboken, NJ 07030, USA John Wiley & Sons, The Atrium, Southern Gate, Chichester, West Sussex, P019 8SQ, United Kingdom John Wiley & Sons (Canada) Ltd., 5353 Dundas Street West, Suite 400, Toronto, Ontario, M9B 6HB, Canada John Wiley & Sons Australia Ltd., 42 McDougall Street, Milton, Queensland 4064, Australia Wiley-VCH, Boschstrasse 12, D-69469 Weinheim, Germany Library of Congress Cataloging-in-Publication Data ISBN 978-0-470-82602-7 Typeset in 10/12pt Cheltenham by MPS Limited, A Macmillan Company, Chennai, India Printed in Singapore by Toppan Security Printing Pte. Ltd. 10 9 8 7 6 5 4 3 2 1 ffirs.indd vi 7/2/10 7:34:04 AM Contents Foreword xv Preface xix Summary points and recommendations xix Background xxii Background to the second edition xxii Background to the fi rst edition xxvi The changing regulatory environment xxvii Introduction xxx More education rather than more regulation xxx The need to identify investment risk xxxi Target readership xxxiii Commercial benefi ts to compliance xxxiii Local differences and specifi c circumstances xxxiv Summary xxxiv Case studies and examples xxxv Themes xxxvii Research coverage xxxvii Sourcing information xxxviii Reasonable basis for recommendations and risk assessment xxxix Confl icts of interest xl Writing in general xli Acknowledgments xlv Abbreviations Used in This Book xlvii Chapter 1: Principles of Research 1 Key points 2 Defi nition and supervision of research 2 Supervision and control of research 2 Marketing research to the U.S. by foreign broker-dealers 3 Stock-picking tips 8 Continuing education 9 Cheating in tests 10 The realm of research 11 Ambit of securities regulations (bonds) 12 Ambit of securities research regulations (equity and credit research analysts) 13 Ambit of securities regulations (swaps and other derivatives) 16 vii TOC.indd vii 7/2/10 9:11:13 PM viii Contents Ambit of securities research regulations (marketers of research, including hedge fund research) 19 Ambit of securities research regulations (analysts as experts on sales desks) 20 Ambit of securities research regulations (stock-tipping bloggers) 21 Ambit of securities research regulations (media commentators) 23 Minimizing approval and publishing risks 26 Honesty and fair treatment of clients 28 Common securities-related violations cited by the SEC and FINRA of the U.S. 28 Regulations tightening up around the world (Hong Kong) 29 Regulations tightening up around the world (China) 31 Regulations tightening up around the world (Japan) 32 Front-running and selective distribution of research 35 Front-running and selective distribution of research (huddles) 35 Front-running of research 36 Selective distribution of research 37 Selective distribution of research (fact-checking) 39 Selective distribution of research (greater conviction of view) 39 Insider dealing and selective disclosure 41 Use/dissemination of price-sensitive information (general) 44 Use/dissemination of price-sensitive information (U.S.) 47 Use/dissemination of price-sensitive information (U.K.) 48 Use/dissemination of price-sensitive information (Hong Kong) 50 Use/dissemination of price-sensitive information (serial insider trading) 53 Use/dissemination of price-sensitive information (pillow talk) 54 Use/dissemination of price-sensitive information (economists) 56 Specifi c requests and proprietary information 58 Defi nition of publishing 59 Unfair portrayal of past recommendations 60 Performance of past recommendations 60 Confl icts of interest and disclosure of interests 62 Catering to investors with specifi c investment criteria 62 Shari’ah law implications for securities research analysts (stocks) 64 Shari’ah law implications for securities research analysts (bonds) 65 The virtues of a vice portfolio 67 Analyst surveys 67 Playing the voting “game” 68 Sourcing information 71 Acknowledging the source 71 Gathering confi dential information 72 Receiving confi dential information 76 TOC.indd viii 7/2/10 9:11:14 PM
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