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An Analyst in Court: LVMH, Morgan Stanley Case Kicks Off Today

PARIS — LVMH Moët Hennessy Louis Vuitton may be parading couture on the runways this week — but it’s airing a bitter grievance in a...

"Obviously, the conflict between the same firm performing both research analysis and investment banking, which is such a hot topic here, has crossed the Atlantic," said Jerry Reisman, an attorney at Reisman, Peirez & Reisman. "The mere fact that Morgan Stanley performed investment banking and stock analysis and research is not a per se violation of any securities laws. However, if the analysis and research is untrue, false and misleading with intent not to be performed with care, then Morgan Stanley might be liable to LVMH under French law.

"Ms. Kent’s actions must be reviewed in the totality of all the events to see if she was impartial, in favor of Gucci, to help Morgan Stanley gain Gucci’s investment banking account."

The two American lawyers noted that the LVMH-Morgan Stanley ruling could tighten securities laws oversees. European laws are not as developed as they are in the U.S., resulting in greater flexibility for companies in how they conduct business.

Benjamin Mark Cole, editor of the soon-to-be published book, "The New Investor Relations," by Bloomberg Press, said the focus on the banking-analyst relationship isn’t likely to ease up any time soon.

"We have seen public companies become more aggressive in asserting that a negative analyst report was issued by someone with a financial ax to grind," he said. "There is now an understanding on the part of management that a negative report is probably either a form of retribution for not giving the investment banking business to the analysts’ securities firm or, as in the LVMH case, the analyst trying to help the client by bashing its competition.

"For better or worse, the standard corporate spin now is conflict of interest. The damning thing is that the brokerage industry can’t refute that, even if the analyst is correct, because these firms do have conflicts of interest."
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