What’s that old line about the second time, it’s farce? I thought of it yesterday when I read that Citigroup has agreed to pay a $15 million fine for allowing its research analysts to talk out of both sides of their mouths. In particular, at “idea dinners” arranged by the firm, its analysts offered investment views on stocks that were sometimes at odds with the official line being disseminated to the rest of the client base. In one instance, an analyst suggested that attendees short a stock that he’d just recently upgraded to hold from sell.
Guys, I thought we’d been through this. I understand that some commission-paying clients pay more than others and deserve more attention and service. But it’s a little much to think that they deserve their own investment opinions, too. I always knew bad habits die hard, but I didn’t realize they can die this hard.
I’m trying to work up a decent level of outrage over this, but it’s all just so pathetic. Idea dinners are a long and colorful Wall Street tradition. They’re a chance for red-blooded Wall Streeters to mix with friends and colleagues, share stories, and burnish each other’s sense of insiderishness. The food is sometimes not bad, either. But as a way to come up with alpha-generating investment ideas (as opposed to incremental brokerage commissions), you’re probably better off ordering in and poring over company financials. Then again, the low comedy is not to be missed.
What do you think? Let me know!