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Federal Judge Bars Instant Publishing of Analysts' Stock Tips 133

An anonymous reader writes "Big Banking firms Barclay's Capital, Morgan Stanley, and Merrill Lynch successfully obtained an injunction against, Inc., preventing them from immediately publishing the firms' stock upgrades and downgrades. This case could have far-reaching consequences concerning internet communication and publication of news." Here's some interesting analysis from Paul Levy, via Dave Farber's Interesting People list.
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Federal Judge Bars Instant Publishing of Analysts' Stock Tips

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  • No, insider trading (Score:5, Interesting)

    by gr8_phk ( 621180 ) on Friday March 19, 2010 @07:55PM (#31545776)
    It's not a trade secret when you share ratings with your clients several hours before you release information to the public. From TFA:

    This time frame preserves incentives for the firms to create and disseminate research reports to their investor clients, while still recognizing the inevitable, fast-moving, and widespread informal communication of recommendation on Wall Street.

    Obviously these reports will affect prices, so you tell clients, wait a bit so they can react, and then tell the public. That's market manipulation plain and simple. A more fair ruling would say they have to release the reports publicly at the same time they tell their clients. But then this is a Manhattan federal judge who knows who he works for ;-)

  • No (Score:3, Interesting)

    by Alaren ( 682568 ) on Friday March 19, 2010 @08:20PM (#31546012)

    From the actual ruling [] (p.78-80):

    It is also worth bearing in mind that the Recommendations are not objective facts, but rather, subjective judgments based on complex and imperfect evidence. In this sense, the Recommendations produced by the Firms represent the kinds of information to which the Court of Appeals has seen fit to extend protection under copyright laws. Such information has been described as “soft facts” or “soft ideas infused with taste or opinion,” and explicitly includes items such as subjective valuations or target prices.


    The public interest in the production of equity research notwithstanding, there is also a competing, and no less important, public interest in “unrestrained access to information,” particularly when the information is heavily fact-based.


    Ultimately, the purpose of the INS tort, like the traditionally accepted goal of intellectual property law more generally, is to provide an incentive for the production of socially useful information without either under- or overprotecting the efforts to gather such information. A balance must be struck between establishing rewards to stimulate socially useful efforts on the one hand, and permitting maximum access to the fruits of those efforts to facilitate still further innovation and progress on the other.

    The "hot news" doctrine is problematic. Wall Street is a den of thieves. But when it comes to the law, I think the court got this one right.

  • Re:Hm. (Score:3, Interesting)

    by hedwards ( 940851 ) on Friday March 19, 2010 @08:23PM (#31546028)
    Hmm, that's right as long as you substitute players with "swindling con artists" and gamblers with "individual investors." They don't both have legitimate arguments because the players are doing things which should be illegal. Shenanigans like buying stock with full knowledge of what it will be in the future and trading stocks through methods that aren't on the market so that they can get different prices than are available to the rest of us.

    That's basically how hedge funds work, since they cannot get a better yield without additional risk without cheating, they cheat. And to the detriment of everybody that plays by the rules. There are exceptions, but by and large the more clever the methods advertised, the further away you should run from and investment firm. Everything is crafted so as to screw over the outsiders.
  • Re:Trade Secrets? (Score:4, Interesting)

    by rolfwind ( 528248 ) on Friday March 19, 2010 @08:40PM (#31546150)

    Remember when that Hulk film from 2003 blamed the internet and texting for ruining opening it's weekend?

    Will movie studios now ask for opening weekend injunctions on news sites too from reporting on plot/story and whether it sucks or not, before most theater-goers had a chance to watch it?

    I mean, while we limit freedom of press for business concerns, we might as well see what other industries would like.

  • Re:No (Score:2, Interesting)

    by mysidia ( 191772 ) on Friday March 19, 2010 @08:41PM (#31546158)

    It is also worth bearing in mind that the Recommendations are not objective facts, but rather, subjective judgments

    The fact that person X has indicated opinion Y, is an objective fact.

    If I tell you that I think Obama's approval rating will go up by 3.68% next week. Then your first ammendment right guarantees you can tell your friends "Mysidia thinks Obama's approval is going up 3.68% next week"

    etc, etc.

    That's not to say I can't claim copyright to my words, or that you could reproduce my statement exactly for that purpose, without infringing on copyrights.

    But there is this matter: when a person is a public figure, or an organization is a large corporate entity, whose every word is of public concern --- then the fact they expressed an opinion, is an objective fact, that should fully enjoy the ironclad protection of free speech rights provided by the 1st amendment of the US constitution.

  • by Alaren ( 682568 ) on Friday March 19, 2010 @08:43PM (#31546172)

    On the basis of the law that the court was bound to apply by the legislative bodies that created it.

    More generally:

    People buy and sell when the ratings change, despite there being no good reason to base it on a change of ratings.

    Are you saying ratings should be illegal? Or are you saying they should be public information from the word go?

    Because if you're saying ratings should be illegal, you're going to have to come up with a better reason than, "they can be manipulated to unfair advantage." Insider trading is a big no-no and people do go to jail for it. Not to mention the public service that is (now, somewhat more belatedly) furnished by the rating process.

    But if you're saying the ratings should be made available to everyone simultaneously, what you're really asking is for the banks to stop preparing these reports--because their subscribers incetivize report preparation. You're arguing for socializing the market to make it "fair." And while I agree that the market has a lot of problems, I don't think turning it into "the people's market" is the right answer.

    And I wouldn't equate "explaining the realities of (semi-)free market investing" with "gussy[ing] it up."

An egghead is one who stands firmly on both feet, in mid-air, on both sides of an issue. -- Homer Ferguson