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Sell-side hit again

Investment bank research has taken a further battering with Schroders, the asset manager, criticizing the role of analysts in the new economy bubble.

Schroders says there are hardly ever any sell calls from sell-side analysts. It found that 67% of analysts thought their bank would be excluded from corporate finance deals by a company if they issued a sell recommendation on it.

Nick Anderson, head of pan-European research at Schroders, says that while banks have to declare in their research if the company covered is one of their clients, they do not have to declare if they are pitching for new business from that company.

Conflicts of interests could also exist on a smaller scale: SEC acting chairman Laura Unger says one in four analysts own shares in companies they cover.

Some banks have taken steps to stop this - CSFB and Merrill Lynch have barred analysts from owning stocks in companies they cover. HSBC is encouraging analysts to issue as many sell recommendations as buys.

While asset managers are sceptical of sell-side buy recommendations Anderson warns private investors to be careful. "They don't necessarily understand that a buy recommendation is not always a buy," he says.

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