FINRA Investigates Wall Street Research After Alleged "Trading Huddles"

An inquiry has been launched into how brokerage firms make their stock ratings and research available by the Financial Industry Regulatory Authority (FINRA), according to a report in the Wall Street Journal.

FINRA, the industry-funded regulator of securities firms, has requested information from Citigroup Inc. (NYSE: C), J.P. Morgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS) and other firms.

The information requested includes details of meetings where non research employees where allowed access to unpublished research and trading opinions.

The regulatory service wants to determine if the meetings are giving unfair advantages to certain customers. Security laws require firms to conduct fair dealings with all customers, and analysts are not allowed to issue opinions that differ from their actual beliefs about a stock. It is however permissible for analyst to have different short-and-long-term opinions on a stock.

This probe comes following an article from the Wall Street Journal in August about possible "trading huddles" at Goldman Sachs (NYSE: GS). During these meetings, traders and big clients were purportedly given access to tips that differed from Goldman's long-term research.

FINRA has asked for a list of all meetings held since 2008, including the minutes, names of attendees, and names of clients who would have possibly received this type of information.

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