Cowen Latest to 'Unbundle'

Cowen, the investment banking subsidiary of France's Societe Generale, has joined the unbundling parade, TheStreet.com has learned.

In an amendment to its initial public offering filing, Cowen said it is a "party to two unbundling arrangements." Cowen didn't name the institutions, but the statement indicates the firm has become the latest on Wall Street to allow big customers to pay separately for research and trading.

Research and stock trading traditionally have been sold as a package on Wall Street. But investors and regulators have grown increasingly critical of the potential conflicts of interest in that arrangement.

Lehman Brothers(LEH) last October became the first big Wall Street firm to lay out unbundling plans, cutting a deal with Fidelity. Fidelity is the only institution that has disclosed its unbundling plans. TheStreet.com reported in January that Lehman's decision was paying early dividends, forcing rivals to play along.

In the filing, Cowen warns that the unbundling route is no walk in the park.

"We may enter into additional unbundling arrangements in the future," the May 17 filing says. But Cowen goes on to add in the risk factors section:

"If unbundling becomes prevalent, there can be no assurance that our sales and trading clients will also pay us separately for our research, or if they do, that our revenues from these clients will be the same as they are currently," Cowen's filing said. "If our clients wish to purchase sales and trading and research services separately, there can be no assurance that we will be able to market our services on that basis as effectively as some of our competitors, in which case our business could be adversely affected."

Lehman's pioneering unbundling deal gives Fidelity a flat fee for its research and a lower fee for trading execution. Deutsche Bank(DB) and Thomas Weisel(TWPG) later said they had agreed to unbundling deals with Fidelity.