Regulation of Financial Analysts

It is often observed that the quality of financial analyst coverage is low. The observation is that the recommendations made by financial analysts are overly positive and the predictive power low. Regulatory attempts have been made to improve the quality of coverage, most notably by addressing a conflict of interest in that financial analysts are providing assistance in gaining additional investment banking business for their employer and are rewarded accordingly. Requiring the remuneration of financial analysts to be solely based on the quality of their coverage, not including any additional revenue they might have brought to the investment bank, was intended to increase the standard in this area. Such Chinese Walls have failed to improve the analyst coverage significantly.