June 27, 2018

Big Investors Don’t Want Analysts Snooping on Them

Recently, Broc blogged about the SEC allowing anyone to track who reads filings on Edgar. Now we have a different “big data” concern: banks are tracking readership of sell-side research. Here’s an excerpt from this WSJ article:

Banks, under pressure to find new ways to boost revenue in their giant research arms, are collecting loads of data on what their clients are reading and when. Beginning about two years ago, banks started moving from the old system of emailing PDFs to using new websites using HTML5 – a web coding language that allows for more tracking of user activity – for distribution of research notes. With the new technology, they can typically see in real-time exactly what pages are being read, for how long, and by which users.

There’s reason for large investors to feel uneasy about this – and they do:

Some bankers said that hedge funds have asked if they can see a stream of aggregated research data, such as what notes are the most read, or longest read, but also that their banks weren’t selling that information, people familiar with those requests said.

The amped up data-tracking has rankled some customers, who worry that even anonymized readership habits, if shared with other clients, could allow rivals to get ahead of their trades. Capital Group, a Los Angeles firm with about $1.7 trillion in assets under management, has asked banks and other research providers to archive readership data related to the firm and not use it in any way for a period of time, according to people familiar with the discussions.

Are the investors getting that promise in writing? For better or worse, it’s exceedingly common these days for companies to capture & share customer information. I blogged a few months ago on “The Mentor Blog” about how that practice is leading to new liability exposures for officers & directors…

Off-Cycle Engagement: Avoiding Blunders

This Cleary Gottlieb memo gives eight tips on how to handle off-cycle engagement – from shareholders themselves. The intro explains why you should care:

Notwithstanding the chorus of shareholder-engagement advisors & investors singing the praises of holding off-cycle meetings – the truth is that the upside of these meetings is somewhat limited and the downside risks are significant. When pressed, any investor will tell you that if there were an actual proxy contest, even a company with a record of excellent off-cycle engagement is far from immune from a decision by the investor to vote in favor of an activist’s short-slate – and it often happens at the 11th hour of the proxy contest.

More importantly, a poor off-cycle meeting can be more detrimental than no meeting. Indeed, investors report that they regularly leave these meetings with a worse impression of companies. And since many institutional investors will each hold portfolios consisting of hundreds or even thousands of companies, many of them won’t take a meeting each year due to limited bandwidth – which amplifies the adverse consequences of a poor meeting.

Tomorrow’s Webcast: “Proxy Season Post-Mortem – Latest Compensation Disclosures”

Tune in tomorrow for the webcast — “Proxy Season Post-Mortem: The Latest Compensation Disclosures” – to hear Mark Borges of Compensia, Dave Lynn of and Morrison & Foerster, and Ron Mueller of Gibson Dunn analyze what was (and what was not) disclosed this proxy season.

Liz Dunshee