May 13, 2002

Arthur Levitt Endorses S&P/Dutton Independent Research Model

Former SEC Chairman Arthur Levitt gave his endorsement of the independent research model used by Dutton & Associates in an interview with the Bloomberg news service, published May 8.

Discussing the need to reduce analyst conflicts of interest in the wake of news surrounding Merrill Lynch, Levitt said, "I think what we're looking for in this new world, in this new environment, which is very different from what it was six months or a year ago, is a research function that is totally pure, in terms of both conflicts of interest and perceived conflicts of interest."

Asked if firms will simply have to stop doing research altogether due to the economics of bias-free research, Levitt replied, "I think that's part of the risk. And part of the answer to that could be the development of independent research boutiques that sell their research to the very firms that they're researching in the same way that the rating agencies, such as Standard & Poor's, sell their ratings. That's a possible development."

He added, "I think that Wall Street has suffered a grievous credibility gap here. And something has got to be done. The leadership of firms such as Merrill Lynch, great firms, have got to rethink the way they're doing business and re-orient it."

Listen To Levitt Interview