A group of 11 U.S. independent equity research firms announced that they are forming the Investorside Research Association to promote investor trust through the use of investment research that is financially aligned with investor interests.

The association’s initial members include: Argus Research; Avalon Research; Battle Road Research; BNY Jaywalk, Inc.; GARP Research; Investars; OTA-Off the Record Research; Schaeffer’s Investment Research; Vista Research ; Vickers Stock Research and The Precursor Group.

Member firms must meet strict criteria in order to join and to use the Investorside Research Certified Provider seal in their company marketing materials. The association has a certification process that requires a review of a provider’s research and marketing materials and attests to the fact that they provide no investment banking services.

If a certified research provider is found to have used the Investorside trademark to misrepresent themselves to investors as free of investment banking, they would be potentially liable for civil and criminal penalties under Federal and State laws covering fraud, fair representation and truth in advertising.

“With 95% of U.S. investment research dominated by investment banking research firms, there’s little competitive pressure to better serve investors with independent research,” said Scott Cleland, chief executive officer of The Precursor Group, in a news release.

“It’s much more profitable to provide investment banking services to companies than to provide pure research services to investors, so the system’s incentives favor company interests over those of investors. The best long term solution to restore confidence in investment research is better informed investors and easier to find, abundant competitive research alternatives.”

John Eade, president of Argus Research, commented that the U.S. capital markets system has recently failed thousands of investors, pension holders, creditors, employees and customers. “It is clear that the system will continue to fail investors, until the root cause — rampant conflicts of interest throughout the system — is corrected.”

Former Securities and Exchange Commission chairman Arthur Levitt praised the formation of the group, saying that the concept is certainly welcome in the wake of eroded investor confidence. “Encouraging competition to investment banking research should be on everyone’s short list of common sense solutions to restore investor trust,” Levitt commented.

http://www.investorside.org