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Independent Research Firms Want Seat at Spitzer's Table

They say they're being left out of talks that could determine their future.

A group of independent stock research firms wants a say in how the government rearranges its industry.

The Investorside Research Association, which represents a dozen small research firms that don't do any investment banking, sent a letter Friday to government officials, protesting its exclusion from talks aimed at taking the bias out of Wall Street research.

The letter followed reports that securities regulators are seriously considering requiring Wall Street's biggest firms to pay up to $1 billion to subsidize two dozen independent outfits. The analytical reports churned out by those small firms would then be distributed free of charge to the brokerage customers of their larger Wall Street brethren.

The group's leaders are concerned that decisions that could affect the financial well-being of their firms are being made behind their back. And they have serious questions about the process for deciding which firms will be eligible for the money raised from Wall Street's top institutions.

"We're scratching our heads about why the government would want to determine the future of independent research without talking to anyone involved in it," said Scott Cleland, chairman of the Investorside Research Association and chief executive of Precursor Group, a firm that specializes in analyzing technology companies.

One of the founding members of the association is Argus Research, one of the nation's oldest independent shops.

A spokesman for New York Attorney General Eliot Spitzer, who is overseeing the negotiations along with regulators from the

Securities and Exchange Commission

, declined to comment.

Right now, not much is known about the details of the proposal, which was discussed at a meeting Thursday between securities regulators and lawyers for a dozen Wall Street firms, including

Goldman Sachs

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Merrill Lynch


Morgan Stanley


Credit Suisse First Boston

. The plan is said to call for the establishment of an oversight board to make sure the money collected from Wall Street firms goes toward qualified independent research firms.

previously reported that the idea of requiring Wall Street firms to provide brokerage customers free access to a smorgasbord of research alternatives has been under consideration.