Wall Street's Discovery of Ethics Is Too Little, Too Late

The amusing element of Merrill Lynch's decision Tuesday to prohibit its research analysts from owning shares in the companies they follow is the suggestion that this move will inject integrity into the research process. If that's not an admission that integrity doesn't exist now, what is? Merrill Lynch's move is little more than press-release chest thumping. It won't improve the quality of its research. It won't eliminate the conflicts of interest between investment banking and retail brokerage activities. And it won't make the unsuspecting individual investor trust analysts any more than they do now.

Worse for Merrill Lynch(MER Quote) and any brokerage that decides to follow its lead is that now Merrill analysts will have to put up with the gripe against high-minded journalists who write about the investment world: If you don't have any skin in the game, if you aren't willing to put your money where your mouth is, why should I listen to you?

The answer is that there's only one reason to listen to anyone giving you investment advice: if they make money for you by telling you what to do or give you good ideas that help you make money. That Merrill is taking a step to require its analysts to behave more ethically than they were before is nice, but it won't really change what matters. ...