Telling Congress About the Rigged Research Game (Cont'd)

Editor's note: TheStreet.com columnist Adam Lashinsky is testifying today before the House of Representatives Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises. The committee is investigating the quality of equity research and reporting available to the average U.S. investor. We are running Lashinsky's testimony in full and in three parts. This is the second part. Be sure to read part one and part three.

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As I began to understand how Wall Street works, I made it a standard practice in my reporting to point out these conflicts. Just because an analyst worked for the investment bank that took public a company I was covering didn't mean I wouldn't talk to the analyst about the stock. I just wanted to be sure my readers understood the pros and cons of this analyst's perspective. After all, while the analyst might be predisposed to be positive about his client, he also tended to know the company better than an analyst who didn't have extensive access. These are trade-offs.

TheStreet.com started in late 1996 with the same principles I already was using. From the beginning it was standard operating procedure to mention any investment banking conflicts any time an analyst commented on a stock. The goal, according to Dave Kansas, former editor-in-chief of TheStreet.com, was to make sure the reader understood that an analyst was "not some disinterested professor pontificating from the ivory tower" about a stock. That didn't make the person a bad source, just one colored by their experiences, as are we all. ...