Financial authorities push to overhaul the securities firm research system
Financial authorities overhaul the research system, expanding analysis of mid- and small-cap stocks and allowing anonymous reports Easing the bias toward large-cap stocks will improve access to information and help investment decisions
The financial authorities have moved to reform the system to reduce the problem of securities firm research being skewed toward largecap stocks. Going forward, large securities firms will have to fill more than a certain percentage of their annual reports with small and midcap stocks, and anonymous reports that do not disclose the analyst's name will also be permitted.
On the 1st, the Financial Services Commission announced the comprehensive “Research System Improvement Plan” and said it would require the nine large securities firms designated as comprehensive financial investment businesses to expand analysis of small and midcap stocks. The targets are stocks ranked below 300th on the KOSPI or below 150th on the KOSDAQ by market capitalization, and the obligation to issue reports on newly listed companies will also be strengthened.
This measure follows criticism that securities firm reports are excessively concentrated on largecap stocks. The financial authorities believe that if analysis of small and midcap stocks increases, investors’ access to information will improve and the market’s valuation function may also be enhanced. However, there are also cautious views that anonymous reports alone cannot fundamentally solve the issue of conflicts of interest between securities firms and companies.