AIMR Says LVMH Lawsuit against Morgan Stanley Will Have a Chilling Effect on Research, Harming Investors.

Business Editors/Legal Writers

CHARLOTTESVILLE, Va.--(BUSINESS WIRE)--Jan. 15, 2004

The Association for Investment Management and Research, the global professional association of Chartered Financial Analyst(R) charterholders and other investment professionals, today issued the following statement regarding the lawsuit by LVMH against Morgan Stanley in France:

AIMR believes independent, high quality research makes an essential contribution to securities markets. It is the responsibility of all market participants to foster an environment in which research can thrive. Cases such as the dispute between LVMH and Morgan Stanley will have a chilling effect on investment research - ultimately harming the investor.

High quality research can only be produced when analysts are free from pressures to bias their work, whether positively or negatively. AIMR does not believe corporate actions that retaliate against analysts for negative research serve the interests of investors or encourage independence and objectivity by analysts.

Fear of lawsuits, of being denied access to management of the companies being covered, of job loss, etc., does nothing to create a climate where independence of thought can thrive. Rather, fear of such actions may deter investment professionals from entering or staying in the securities research profession and cause analysts to have second thoughts about stating their true conclusions if those conclusions would not satisfy a company. Ultimately, this is bad for analysts and their research, and disadvantages all investors.

Companies that disagree with an analyst's research report, its analysis or conclusions, have many ways to correct what they believe to be misstatements of facts, misinterpretations or inappropriate conclusions.

-- AIMR recommends first contacting the analyst directly to point

out any inaccuracies in the research report and to request a

correction.

-- Depending on the analyst's response, the company may want to

post a rebuttal on its website, being careful to state the

facts only and avoid making any personal attacks on the

analyst.

-- The company may also want to contact the director of research

at the firm.

-- If a company is still unsatisfied after taking these steps and

believes misconduct is involved, then it may be appropriate to

approach the relevant regulatory bodies.

-- AIMR believes litigation should be considered, if ever, only

as a last resort.

At the same time, analysts have an ethical obligation to exercise diligence and thoroughness in their research, clearly distinguish between fact and opinion, and have a reasonable and adequate basis for their recommendations, supported by appropriate research and investigation. They must make reasonable and diligent efforts to avoid any material misrepresentation, and use reasonable care and judgment to achieve and maintain independence and objectivity.

Likewise, analysts' employers have a responsibility to create an environment in which analysts can conduct research without interference by other firm interests or fear of retribution. In particular, pressuring analysts to favor clients of the firm, or disfavor competitors of those clients, is an unacceptable practice. Firms also have an ethical responsibility - and increasingly, a legal responsibility (such as under new U.S. law) - to disclose client relationships that would affect a reasonable investor's judgment as to the independence and objectivity of the research report.

Because courts rarely have the necessary expertise to judge the accuracy, competence or quality of research, it might be productive for regulatory bodies to engage all industry participants to explore creating an "arbitration mechanism" that would give both analysts and companies confidence that their respective views, concerns and needs are being met by the process.

About AIMR:

The Association for Investment Management and Research is a non-profit membership organization with more than 68,000 individual members, including the world's 55,000 holders of the Chartered Financial Analyst(R) (CFA) credential. AIMR has members in 116 countries, and offices in Charlottesville, Va., London and Hong Kong. It is also well known for its stringent Code of Ethics and Standards of Professional Conduct, a set of principles and guidelines that investment professionals around the world use to benchmark what constitutes fair and ethical business and investment practices. More information may be found at www.aimr.org or by calling 1-800-247-8132 or 1-434-951-5499.