We write reports on companies which the companies can then make available to selected investors that express an interest in the company via PESE. These reports are paid for by the companies, which is a problem for some investors because of an understandable concern that company management will pressure our analysts to write favorable opinions. In an effort to assure investors that we have taken steps to minimize bias, we have created a report structure that excludes opinions by the author and we adhere to the principles set forth by Research Independence.org.
which calls for payments to analysts to either be made before opinions are issued or be dependent upon investment performance.
In the traditional Wall Street research , profits from non-trading divisions (which generally lose money) are transfered to the research department in a manner that is designed to comply with the principles set forth in the Wall Street Global Settlement. However, the traditional Wall Street system still receives pressure from clients unhappy with unfavorable research opinions if the client stops doing business with the firm. What's the solution? Receive the payment before the report is written and do not include opinions from the author of the report. Our reports contain no recommendations or target prices but have the following structure:
1)
Company background
2)
Risk Factors
3)
Independent Opinions
4)
Modified Porter's Analysis
5)
Financial Model
Why would private companies be interested in providing information to complete strangers? They aren't, especially since some of those strangers may turn out to be competitors. Instead, the reports are written for the companies and provided by them selectively to investors that the companies approves. Or, the reports can be distributed via an investor newsletter that is offered on a regular schedule and that complies with the Supreme Court's 1985 Lowe decision in that it does not does not give personalized opinions about the investments as would an investment adviser licensed under the Investment Advisors Act of 1940.
