It does be worthwhile to entrust to analysts during the estimation of the investment attractiveness of companies? G. vygon.

Problem moral hazard in THE USA.
How to determine the effectiveness of investments?
As is known, fund analysts make the survey of the investment attractiveness of securities not at all for our own pleasure - by these they earn to themselves money. In this case in their reports they give unequivocal recommendations regarding purchase or sale of various securities, i.e., help to earn money investors. In such a case, when the opinion of authoritative analyst is widely rastirazhirovano on BY TV, electronic and printed MEDIA, it is capable of having an essential effect on the market of the actions of concrete company. The possibility of manipulation with market and the presence of the conflict of interests in its participants can have extremely negative consequences. A series of the widespread scandals on the fund market OF THE USA drew attention to community to this problem and forced commission for securities and exchanges (SEC), together with the national association of the dealers of securities (National Association of Securities Dealers, NASD) and New York stock exchange (NYSE), to study the serious study of the practice of the composition of analytical reports.

Even during July of the past year SEC it let out the special "warning" to investors, in which was designated a number of the peculiarity associated wities the interpretation of analytical reports. In particular, in a study is indicated number of the factors, capable of substantially influencing the recommendation to investors. Thus, it was noted, that the analysts can work directly on the investment companies and the jars, which render the services to emitentam of securities, on which reveal the recommendations, or to emitentov themselves. In other cases the analysts can directly or indirectly manage securities. As a whole SEC are subdivided the analysts into three conditional categories:
The analysts of salesmen - workers on the bond houses and the companies, which render broker services to strange investors;
The analysts of buyers - workers on the mutual and khedzhevye funds, which buy securities for themselves;
Independent analysts - those working only on itself and selling to clients its surveys on the subscription or to order.

In each case the situations, cmbined with the conflict of interests in rating faces, are possible. Thus, during the arrangement of securities on the market all participants - anderrayter, emitent and analyst, are directly interested in the positive recommendations. This Anderrayteru necessarily for the successful arrangement of concrete release and maintenance of quotations, and also strengthening of reputation for the attraction of the following clients. Emitent is interested in the attraction of money and the decrease of the cost of drawn capital, and also in an increase in the quotations of its actions. As far as analyst is concerned, his compensation and bonusy frequently directly depends on the volume of the operations of bond house. Negative report can tear away the release of papers, wet slightly the reputation of anderraytera or lead to the loss of client and the losses. To analyst bank for this report to thanks they will not say, most likely simply they will discharge.

Further, with the rendering of broker services, company can not take money from the clients for its instant analyses. However, recommendation "to buy" draws new clients and increase the commissions. Therefore to brokers it is profitable to more frequent give recommendation to the purchase than to sale. Investors this understand and interpret the recommendation of broker companies "to hold" as signal to sale.

There is nothing also surprising in the fact that the analysts investment companies extremely rarely recommend the selling of papers, whom they manage directly, through the options or indirectly. In 2000, according to the data SEC, the recommendations to sale were given less than in 1% of cases, when analysts were personally interested in an increase in the quotations. To this, of course, it is possible to object that the broker companies are the professionals of fund market and buy only best papers with the large potential of an increase in the cost. However, since on the average still no one it was impossible in the long period to re-play market, this argument was unimportant.

Existed at that moment rules NASD and NYSE required analysts and broker companies to reveal their positions on the recommended papers and nature of interrelations emitentom in last three years. Furthermore, for the actions of company, which accomplishes primary arrangement (IPO) frequently acted the so-called period of freezing transactions (lock-up period). During this period, which is continued in entire period of primary arrangement and for a while after its registrations, insaydery do not have the right to sell action or to realize options without the permission of anderraytera.

However, it is understandable that during the transmittal of recommendations in the interview THE MEDIA the analysts never revealed information about the straight interest or affilirovannosti of sides. As a result the rare possibility for the investor to reveal the conflict of interests consisted in the attentive reading of the reports, where the necessary information was usually small type in the form of diffuse formulations somewhere in the reservations about the refusal of responsibility (disclaimer), footnotes or on the revolution of the printed reports, i.e., in the least read places.

This state of affairs did not arrange SEC and commission, together with NASD and NYSE, it decided to create the new rules, intended to avoid the appearance of the possible conflicts of interests in analysts, investment companies and emitentov, and to also protect investors from the possible falsification with the composition of reports. During February NASD and NYSE promulgated new rules, and on 8 May commission approved corrections to them, even for the more stiffening requirements for the conditions preparations of reports and the disclosure of information. In the new editorial staff of rule the following positions are included:

Promises of positive recommendations. It is from now on forbidden to make to analysts custom-made surveys or to threaten with the opinion of high rating or price orientator for the purpose of influence on the business of bond houses. Furthermore, to anderrayteram it is forbidden to let out instant analysis on emitentu during 40 days after primary and 10 days after the second of arrangements.

Limitations to the contacts. To bond houses it will forbidden have an effect on analysts with the preparation of reports, and analysts, in turn - transfer materials to emitentam to their publication.

Compensation for analysts. To companies it will forbidden tie the compensation for analysts to the financial operations on the concrete transactions. If the wage of analyst depends on the revolution of firm, this fact must be opened separately.

Compensation for investment companies. With the release of instant analysis the investment company will have to reveal information relative to that, it did obtain reward from emitenta for the shown to it investment- bank services in the course of the recent 12 months or if it plans to show them in the next three months.

Limitations for the analysts in investment. To analysts and to the members of their families it is forbidden to invest in the action of emitenta to the primary arrangement of the actions of company, which it mentions in its surveys. Furthermore, by them it is forbidden to deal in actions 30 days prior to and 5 days after the output of instant analysis on the company.

Disclosure of information about the possession of the actions of emitenta. Analysts are obligated to reveal the fact of the possession of the actions of emitenta being investigated, and firm - if they have more than 1% joint-stock capital.

Disclosure of information about the value of rating. Firms and analysts must clearly explain that they imply by other one or rating or another, on which rank the companies. Furthermore, must be opened information relative to that how these ratings they are connected with the recommendations to clients and the comparative dynamics of a change in the quotations of securities and it is rating.

Disclosure of information during the public appearances. Analysts will be are obligated to reveal the appropriate information, if they give commentaries or recommendations during the seminars, the appearances on TV, in the radio of interview, etc.

The publication of rules for the analysts, the investment companies and emitentov caused wide resonance in American community and ambiguous reaction among participants in the fund market. If the most important investment companies and jars recognized the need for the stiffening of requirements and as a whole expressed satisfaction by rules, then some Democrats, institutional investors and groups of end users remained dissatisfied. In their opinion, the rules was late, and formulations too soft and still allow the possibility of manipulation with the opinion of investors. Here, true, it did not manage without the policy itself chapter SEC Of kharveya Of pitta (Harvey Pitt) they charge with the unethical behavior. Thus, recently Pitt was encountered with new leader KPMG, Yevgeny O'Kelli (Eugene O'Kelly), who was its client in the years of the work Of pitta by partner in the legal office Shriver & Jacobson. At the present moment KPMG it is under investigation because of the suspicion of the uncertain Audit Xerox and in THE MEDIA here appeared the versions, that with the personal encounter Of o'Kelli requested Pitta to shut the matter.

However that may be, the effectiveness of these rules will be checked in practice SEC, NASD and NYSE during the year. In this case new corrections in them will be as needed introduced. How the stiffening of requirements for the analysts, the investment companies and emitentam will help in the future to avoid the scandals, similar Enron or Merrill Lynch, future will show.
Situation in Russia.

In Russia there are no independent fund analysts and it will for long not be on a whole series of the reasons, at basis of which lies economic factor. First, demand itself for the services of analysts is thus far severely limited in view of the lack of development of fund market. With the summary capitalization of the dealt companies in 120-130 billion dollars. BY THE USA the daily volume of tradings composes a total of several tens of millions of dollars. Of more than two hundred emitentov of the paper only of seven - ten it is possible to conditionally consider it relatively ready. In the essence of brokers and analysts on the market it is more than the dealt actions, to say nothing of ready papers.

In the second place, information opacity substantially decreases the value of the analysis, based on public data. The information, which is been public in THE USA (for example, the consolidated financial reports), in Russia they are accessible only chosen, even then with the three-month delay. Expenses for obtaining of the necessary information are sufficiently great, and the independent analyst hardly will be able to pay them by sale of his surveys. But the qualified analyst has high cost and wants so that it would be evaluated on the merit. The required wage to it they can ensure only important financial companies or production enterprises.

Finally, the history of the majority of Russian emitentov, investment companies and banks is too short. Actually fund market does not exist even ten years. In this time a few knew how to make to themselves reputation, much more than companies had time to lose it. But analysts do not appear from anywhere - they without fail must first pass the appropriate school, after obtaining of base formation work in enterprises and in the financial companies.

Thus not surprising that all best and influential fund analysts today work on the most important investment companies and the jars - "troika dialogue", "Rennesans- capital", OFG, "nIKoyl", Brunswick, "Alpha- bank", "aton", "prospectus", "Tsentrinvest" and many others this fact predetermines existence of the serious conflicts of interests.

To the conflicts of interests on the Russian fund market they recently turn increasingly more attention. In essence this is reaction to the American scandals; however, precedents exist already and in Russia. By analogy with the case of Audit Enron by company Andersen they attempt to fan history with PwC, by auditor "gazproma". From the side it is not understandable, what in this history it is more - policy, the righteous dissatisfaction of minoritariyev with the doubtful account of gas concern, fight for the Russian market for auditorial services or something still.

In the second decade of March in the "lists" appeared the article "analysts they praise" its "papers", dedicated to the conflict of the interests of Russian anderrayterov of bonds. Contributor revealed that anderraytery are always recommended to the investors of the paper of their clients, although sometimes and they add for the company of other emitentov. Furthermore, in the article it is noted, that in Russia easily can be used the recommendation "not to buy", moreover based not at the objective finance analysis of emitenta, but on one desire alone to do harm to competitor.

In contrast to the situation with the arrangement of securities, when anderrayter is well known, with the usual trade in securities to note the conflict of interests somewhat more complex. However, here strike some regularities. Thus, the analysts Of "nIKoyla" never will allow themselves even hint to the criticism Of lUKOYLa, to say nothing of recommendation to sale of the actions of company. On the contrary, for the company- competitors will always be located the arguments, which confirm their pereotsenennost' in comparison with LUKOYLom.

The comparative estimation of Russian companies, by which so be fascinated all fund analysts, is generally separate theme for the conversation. Thus, a fantastic increase in the capitalization "To sibnefti" nevertheless cleft the ordered numbers of the optimists of fund market. "troika dialogue", "prologue" and "aton" evaluate the "valid price" of the action of company, according to data of "lists" respectively into 1,15, 1,5 and 1,6 dollars. USA. With today's cost only it is below 2 dollars. this indicates recommendation to sale. Brunswick At the same time consider valid the price of 2,4 dollars, and "nIKoyl" - 2,2. In what the reason for this divergence? In the case with Brunswick we again observe the conflict of interests - company recently it came out by the lid- manager of arrangement 1,26% of regulation capital "To sibnefti" to institutional investors, by it it is profitable to warm up market. Especially because for this there are all possibilities, since Brunswick is today one of the most important companies for the volume of operations on the Russian fund market, and the real portion of actions "To sibnefti" in the free rotation is very small, most likely much less than declared by 12%.

Even if we reject the conflict of interests, then divergences in the estimation of "valid" price remain too great. The fact is that cannot be objectively calculated this number. All coefficients like P/E, P/S, kapitalizatsiya/zapasy and the like give each their ranking of companies and are the linear to the scale rough similarities of the ratio of capitalization to the given cost of the flow of money. Takeing into account the complexity of the structure of Russian petroleum it is holding and their opacity, fundamental cost cannot calculate not the fact that analysts, but also corresponding divisions of strategic planning in companies themselves. Especially amusingly appear these attempts in the attitude of this company as "To sibneft'". It suffices to recall the last year's history, when analysts forecast a drop in the clean they arrived, were called specific numbers, and "To sibneft'" take yes and declare about its two-fold increase. The simply naive analysts not of all neftetreyderov calculated, but "To sibneft'" decided to consolidate them into its account.

Thus, the conflict of interests on the Russian fund market is today represented in its entire latitude. This phenomenon is so ordinary that practically they do not speak about it. The thanks to Americans, drew attention to the Russian problems. True, soon the conflict of interests it will be impossible to manage, moreover not only because of the current state of the development of fund market, but also because of the weakness of controlling bodies. Thus far the most negative phenomena of capitalism in Russia get accustomed immediately, and positive - with great difficulty; therefore investors on no account is worth losing vigilance.
Root of all evil - depreciation of reputation.

The increased in frequency cases of the widespread scandals, in which are mixed the most important participants in the fund market - emitenty (Enron) bond houses (Merrill Lynch), auditors (Andersen, KPMG, PwC), and also analysts the top managers, make it possible to speak about the outlined tendency. Thus, since the beginning of the 90th it is annual sharply it deteriorated the quality of financial and analytical reports, which is manifested in a sharp increase in the number of revision of their results. The average number of yearly cases of the overestimation of profit, according to the data NY Times, grew with 49 in the period from 1990 through 1997 to 91 V 1998- m, 150 V 1999- m and 156 in 2000. The optimism of analysts at the same time noticeably increased. If in 1990 to six recommendations to the purchase it was at least one to sale, then to 2000 this relation increased to 100 to one. Collapse NASDAQ and the turn of scandals did somewhat sober investors and analysts; however, for a long time whether?

Today is brought into question, which was being seemed earlier firm, assertion about that which to participants in the market is simple disadvantageously to go to the fraud. The idea, which was being been based on the concept of the exceptional value of reputation, earned during many years or even decades, loses urgency on the eyes. Risk to blow up reputation because of one client in order to lose all rest, seemed too great so as to go to it. Meanwhile this theory, can be and valid from the point of view of firm, it is incorrect for the separately undertaken person. Auditor will prefer to sign false report, and analyst - to give erroneous recommendation, provided not to lose advantageous client and not to be deprived of the well paid work. This question has completely specific price, what cannot be said about reputation, especially in Russia.