By NBCNews.com staff
A report Monday appears to confirm what most small investors have long feared: Some investors in the market are more equal than others.
The New York Times reports that some of Wall Street?s top analysts are transmitting their views of companies to preferred clients before they disseminate them more broadly.
These pointers are coming in the from questionnaires that the analysts answer and submit electronically, either monthly or quarterly, to some of their firms? largest hedge fund clients, the Times said. The surveys give those privileged investors an early indication of whether a bank is raising or lowering its view of a company?s prospects, allowing them to trade on the information before other investors hear about it.
The most salient information contained in the questions answered by analysts is about possible earnings surprises at companies they follow, the report said.
Analysts at Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch and UBS have participated in the programs, according to the Times.
The information that an analyst disseminates to investors about the companies he or she follows can have a palpable effect on a company?s stock price. A downgrade or an upgrade, for example, can make a stock sink or soar, and so receiving that information first can be profitable for a stock trader.
Securities regulators introduced Regulation FD in August 2000 -- a law designed to maintain a level playing field on Wall Street by preventing the so-called ?selective disclosure? of important company information to securities professionals ahead of its dissemination to the general public and other holders of a company?s stock.
The concept of ?selective disclosure? arose in connection with the Facebook?s public stock offering in mid-May.
Facebook?s underwriters allegedly passed on important negative information about the company?s second-quarter results to big potential investors, but small investors didn?t receive the same information.
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