Independence pay

28 February 2011 By Margaret Doyle

Eight years after Eliot Spitzer cut off analysts from investment bankers, independent research houses are taking off. Low overheads and supportive regulation helps these boutiques earn a good living. But they can’t get too big without endangering their raison d’etre.

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Autonomous Research on Feb. 7 said it had hired Paul Myners, a former Labour City minister, to be partner and chairman.

Autonomous said Myners would spearhead the financial research specialist's expansion into Asia and the United States.

In 2001 Myners, then chairman of Gartmore, the fund manager, wrote a report on institutional investment for the British government. He recommended that broker commissions, which include payments for research, should be paid from fund managers' own pockets rather than from client funds.

In 2005, Britain's Financial Services Authority required fund managers to split commission payments into execution and research. Moreover, the regulator insisted that institutional clients be allowed to direct research payments to preferred analysts under "commissionsharing agreements".

In 2006, the U.S. Securities and Exchange Commission tightened up what brokers could buy with "soft dollar" commissions. The S.E.C. subsequently enabled independent research houses to be paid using socalled "client commission arrangements".

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