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UBS Embraces the Buy Side

Sources say it plans an independent research operation.


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is looking to create some internal competition when it comes to stock research.

The New York-based brokerage arm of the Swiss financial-services giant is putting together its own team of analysts to come up with a list of stock tips and recommendations, sources say. The new research team, which could be announced as soon as next week, will consist of between 10 and 20 analysts.

People familiar with the concept say the new team of analysts will operate much like the so-called buy-side stock researchers who work at big mutual funds.

Buy-side analysts assist mutual fund portfolio managers in coming up with investment ideas. Similarly, this new crew of analysts at UBS will help brokers come up with independent investment ideas for their customers.

A UBS spokeswoman declined to comment on the new research operation.

In theory, the new group of analysts could come up with different recommendations on stocks than the large crop of so-called sell side analysts already working for UBS's investment bank. In compiling their recommendations, the buy side analysts will also consider research recommendations from analysts at other Wall Street firms, sources say.

Sell-side stock research got a black eye three years ago, when 10 big Wall Street firms, including UBS, paid $1.4 billion in fines to settle allegations that research analysts conspired with investment bankers to issue favorable ratings on stocks. The quality of sell-side research has improved since the settlement with UBS,


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. Still, many on Wall Street still view it as being less than independent advice.

But even after the research settlement, a ratings change by a big firm has never lost the potential to move the price of a stock.

UBS is believed to be the first big Wall Street firm to set up a competing research operations. The new buy-side research will be available to all UBS brokerage customers in the U.S. along with the reports compiled by the firm's investment-banking analysts.

Several UBS brokers familiar with the plan say the idea is intriguing, but they aren't sure how much demand there is for a new class of stock research. The brokers say they already consult a wide array of analytical opinions before recommending stocks to their customers.

UBS is rolling out the new research operation as securities regulators are investigating an allegation that at least one UBS employee was involved in improperly providing advance notice of upcoming changes in analyst stock recommendations to traders and hedge funds.

A trader who gets advance notice on a rating change by a big firm often stands to make a quick profit if he or she can place trades before the rest of the market.


investigation by the

Securities and Exchange Commission

, first reported by

, is in its early stages. But sources says regulators in the SEC's Washington, D.C., office consider the matter a high priority and believe that multiple traders got an advance work on changes in stock recommendations.

Some sources say that the information was being sold to traders by an unidentified UBS employee. UBS has declined to comment on the investigation.