CLSA banking analyst Mike Mayo gave a presentation at the Security Analysis and the Search for Value conference in November 2011 called the “An Analyst’s Bill of Rights.”
“Investors, and those of us who represent investors, have three rights. They have the right to ask for information, the right to get information, and the right to act on that information. Understanding and taking advantage of those rights are important for all investors,” Mayo writes.
The full version has been posted on the CFA Institute ‘s site in the members section.
We’ll give you the abridged version with some of Mayo’s comments.
- Right to Ask for Information: “I am known for asking a lot of questions. I have no angle when I ask a question except to better understand a company and the operating environment, but I do believe that I have the right to, at least, ask the question.”
- Right to Get Information: “Example six: The auditors of Bank of America were paid $188,000 per published word for the three boilerplate paragraphs of their opinion of the Bank of America financial statements. Obviously, the auditors are privy to a lot more information than they are sharing with us. Bank of America shareholders could not possibly be happy about paying $188,000 per published word and getting so little for it. Either the auditors are overpaid or, more likely, they are not communicating enough of what they know to investors. It is not a close call. Investors have a right to get all relevant information about the investments that they have made.”
- Right to Act on that Information: “When I was studying for the CFA exams in the 1980s, I really did not understand the importance of the ethics curriculum. My focus then was on financial analysis. But over the years, the ethics issues have come up time and time again. One example is the abnormally positive buy sentiment for U.S. stocks. According to the Wall Street Journal in November 2011, only 3 per cent of all U.S. stock ratings were sell recommendations, 45 per cent were buy recommendations, and 42 per cent were hold recommendations. This type of heavy emphasis on buy recommendations is not what the CFA Program teaches. CFA charterholders and candidates are the core of the investment industry. We care more than others. We should be leading the way in encouraging ethical practices and honesty in providing the information that investors have a right to know. In summary, investors have a right to ask for the information they need, a right to get the information they need, and a right to act on the information they get.”