Wed, Mar 01, 2017 page10

• CLSA shuts down US equity research

  GLOBAL EFFECT: A European initiative to make investors pay separately for analysis has led to them allocating less to brokers who provide such services, a poll showed

  • Bloomberg
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  CLSA Ltd, a brokerage owned by China’s Citic Securities Co (中信證券), on Monday shut down its US equity research operations, laying off more than half of its workers based in the country.

  Hong Kong-based CLSA on Monday dismissed 90 US-based employees, most of whom worked in research, including research sales support staff, as well as a few traders, spokeswoman Simone Wheeler said.

  The terminations include analysts Mike Mayo, a managing director who covered banks, and Avi Silver and Ed Maguire, both of whom wrote about technology firms, she said.

  Mayo and Maguire declined to comment, while Silver did not immediately return messages left after business hours.

  Financial research houses are facing revenue pressures, including from a proposal in Europe to make investors pay for investment analysis separately from trading commissions.

  While CLSA CEO Jonathan Slone said the move was not directly linked to the Markets in Financial Instruments Directive, also known as MiFID, he last week said that investors should be allowed to decide what they want to pay for analyst research without too many regulatory restrictions.

  The US closure “was not made with any particular rule in mind,” Slone said in an e-mail. “You could say that the overall shift on payment for research was part of this, but this has been a long evolving process linked not only to MiFID, but a whole host of changes.”

  “We simply plan to invest in other parts of our business in the US and believe we can best serve the clients in cash equities within an execution-only framework in the US domestic marketplace,” Slone said.

  While the rules are a European initiative, banks in Asia are also feeling the effects. Global investors have been allocating a smaller proportion of their commission payments to brokers that provide equity research and advisory services in Asia over the past two years, a survey released last month by Greenwich Associates showed.

  Citic Securities, which bought CLSA from French bank Credit Agricole SA in 2013 for about US$1.2 billion, considered selling the Hong Kong-based brokerage last year, people with knowledge of the matter said at the time.

  It cut about 25 staff in Asia two years ago, mainly in equities, a person familiar with the move said then.

  CLSA began telegraphing some operations were strained in September last year, when it asked its 1,500 workers globally to take as many as 10 days of unpaid leave through this month as it sought ways to cut costs.

  The firm introduced similar measures three times — in 2003, 2008 and 2009 — when it underwent trying market conditions.

  The firm’s Americas unit is to now employ 85 workers to execute US and Asia stock trades, plus Asia equities sales, Wheeler said.

  Those employees, led by CLSA Americas LLC CEO Rick Gould, will continue to offer services including sector and portfolio trading, electronic execution and commission management, the company said in a statement on Monday.

  CLSA, established in 1986, has about 1,500 staff in 25 offices across Asia, Australia, the Americas and Europe, its Web site said.

  The brokerage became well-known for its high-profile annual forums, where guests included former US president Bill Clinton and filmmaker Francis Ford Coppola.

  Bank analyst Mayo is the author of Exile on Wall Street: One Analyst’s Fight to Save the Big Banks From Themselves.
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