Abstract
In an effort to protect the virtue of equities research on Wall Street, the Securities and Exchange Commission (SEC) has practically reinvented it. A landmark agreement between the SEC and 10 major securities firms that were embroiled in an embarrassing conflict-of-interest scandal requires, among other things, a severing of all links between research and investment banking. In part, this means that equities research departments may no longer be subsidized by their firm's investment banking group, inevitably leading to smaller staffs at the large Street firms. Cutbacks at the big Wall Street firms will most likely create opportunities for independent research firms that avoid the conflict-of-interest issue because they don't offer investment-banking services.
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