Banc of America Securities is splitting its fixed-income research team into two camps: desk analysts who produce research to support trading activities and independent researchers who can offer the most objectivity. The move is BofA's response to The Bond Market Association's guidelines to prevent conflicts of interests in fixed-income research, which were released about a year ago. "We've been at work on embracing the new environment since the guidelines were released," said David Goldman, global head of debt research, although he declined to say why BofA is taking these steps now.
Other Street firms such as Morgan Stanley and UBS have physically separated researchers and bankers from the trading and sales desks in response to the guidelines (BW, 10/13) while others, such as Merrill Lynch, have looked to tighten the disclaimers accompanying their research (BW, 7/26).
As part of the changes, which BofA informed investors of in a note last week, BofA has eliminated dual reporting lines to the research and business sides. These reporting lines may have naturally crimped researchers' objectivity. For example, Eric Hiller, chief interest-rate strategist, reported to both Goldman and Gerhard Seebacher, head of global rates sales and trading. Now as the liquid rates trading desk analyst, Hiller will report solely to Seebacher. Gerald Lucas, head of Treasury and agency strategy, will continue to publish Treasury and agency strategy and report solely to Goldman, he said.
In some cases, some researchers have been moved off the trading desk entirely. For example, the high-grade researchers been moved away from the trading area, Goldman said.
BofA has also more sharply delineated which researchers can publish. Trade analysts will sit on the desks and only publish reports on macroeconomic conditions and brief trade ideas. Independent researchers, on the other hand, can publish longer reports making a more substantive argument for investment decisions.
Goldman said BofA will increase its fixed-income research headcount as a result of the new approach but he declined to provide specifics.
