Morgan Stanley to Require Analysts to Disclose Stocks

Another major brokerage firm has taken steps to deflect criticism that Wall Street’s stock research is tainted by conflicts of interest.

Morgan Stanley Dean Witter & Co. (ticker symbol: MWD) said Friday it will require its 129 equity analysts in North America to disclose whether they own the stocks they cover, a practice an industry group recommended Wall Street firms adopt two months ago.

Morgan Stanley, the second-biggest brokerage, isn’t going as far as Merrill Lynch & Co. (LEH) and Credit Suisse First Boston, which limited stock ownership by analysts. Goldman Sachs Group Inc. (GS) also required only that ownership be disclosed, adhering to guidelines the firms helped write.

Disclosures by analysts at Morgan Stanley and Merrill are important, money managers said, as their research is distributed widely to individual investors. Morgan Stanley has about 5 million clients worldwide who could have access to its research.

“The institutional investor always knew there were conflicts of interest, especially in regards to investment banking relationships,” said Laurie Buntain, co-manager of the $775-million Sife Trust Fund, which owns Morgan Stanley shares. “The individual investor didn’t.”

Morgan Stanley spokesman Ray O’Rourke declined to comment.

The Wall Street firms are responding to criticism from the Securities and Exchange Commission and Congress about analysts’ conflicts of interest. The firms are seeking to temper concern their research is clouded by analysts who own the stocks and help the firm win investment-banking business.

The securities industry on Thursday endorsed a plan by the National Assn. of Securities Dealers requiring analysts to disclose potential conflicts of interest. The Securities Industry Assn., representing 700 firms, previously had pushed for a delay in enacting any rules on analysts’ conflicts.