That's Giving Them an Earful, Eliot

New York State Attorney General Eliot Spitzer stunned Wall Street recently when he used a black-tie occasion to honor the winners of the best research analysts of the year to state impolitely that virtually none of them deserved an award.

Standing before the audience at Institutional Investor magazine's All-American Research Team Awards dinner, Spitzer said his office commissioned independent research firms to analyze recommendations made by more than 400 analysts, covering 51 industries, who had been ranked at or near the top by Institutional Investor. Guess what? Based on their actual stock picks over the past three years, analysts who were ranked No.1 in their fields actually had pretty mediocre performances. Spitzer went on to say that average investors wouldn't know the truth because Wall Street promoted the rankings of their analysts but withheld data on their stock-picking acumen.

Spitzer told the audience that he was angry at how difficult it was for him to gather the data needed to measure the performance of analysts objectively. So no one should be surprised that Spitzer has decided to force Wall Street investment banks to make public their analysts' actual performance annually as part of a global agreement settling claims against them. "Firms will be required to disclose that data as part of any deal," he told BusinessWeek.

In that now-infamous dinner at the Ritz-Carlton Hotel in Lower Manhattan, Spitzer said that "after spending hundreds of hours listening to investment banks and their lawyers lecture about the efficiency of the marketplace, I'm still disappointed to learn that they withhold from the market the data necessary to allow it to perform efficiently." He plans to change that.

By Bruce Nussbaum in New York

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