It doesn't take much to ruin a fledgling expert network research company. The taint of a an insider trading probe is more than enough to send clients scurrying.
Consider Lerrink Swann, of Boston, which launched an early healthcare expert network known as MedaCorp. The controversy over the insider trading scandals is likely going to prompt executives to shut the network down. Broadband Research is also effectively out of business, after its founder John Kinnucan went public with his tale of strong-arm FBI tactics. His clients really had no choice but to bail on him.
One would hope the big boys of the expert network industry--the likes of Gerson Lehrman Group, Guidepoint Global and Coleman Research Group--are safe from all of this, but you never know.
At this point, in the minds of many buy-side executives, the taint is broadly spread. They may want to ratchet back, at least until the dust settles.
In fact, hedge fund Balyasny Asset Management has stopped using "expert network" research firms in response to the government investigation, reports MarketWatch. In this case, the probe hit close to home; the fund firm has been subpoenaed. One of its analysts is suspected of giving inside information to a hedge fund client, according to media reports.
Other funds may want to play it safe right now.
For more:
- here's the MarketWatch article
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