New York—Investorside, the trade association for independent  research, held a members-only meeting Thursday, June 7^th covering topics from technology to regulation.  Investorside was formed in July 2002 and grew quickly in the wake of the Global Research Settlement and uncertainties about soft dollar payments to independent research providers.  The organization now has new challenges to confront: Chairman's Cox call for the abolishment of soft dollars, the rise of CCAs, and the end of the global research settlement.  The session was an opportunity for Investorside to discuss these issues and formulate responses.

Independent research represents a growing portion of a shrinking pie.  Larry Tabb of The TABB Group presented the results of a survey which projected 18% growth in hard dollar spending for independent research and 11% growth in soft dollar spending for independent research (before Cox's call for a soft dollar ban).  This increased institutional investor demand for independent research is contrasted with a forecasted 24% decline in spending for bundled broker research and a modest 3% growth in internal buy-side research.

Nevertheless, Investorside and its members will be under pressure from challenges to the research industry generally.  As Cox mentioned in his call for a ban to soft dollars, investors currently spend $1 billion in commission payments (soft dollars) to purchase independent research [Cox neglected to mention the $6 billion in spending for bundled brokerage research.]  Investorside and its members are concerned that if soft dollars are abolished as a payment vehicle the $1 billion will shrink.

A number of Investorside's members have been successful in being chosen by independent consultants administering the Global Research Settlement.  Spending on independent research through the Settlement is averaging around $100 million per year.  It is doubtful that this level of spending will continue after the Settlement expires in August 2009.

Investorside recently co-sponsored a white paper on commission sharing arrangements with its European counterpart, The European Association of Independent Research Providers (EuroIRP).  Investorside is also formulating its broader strategy regarding commission sharing arrangements (and their US equivalent, client commission arrangements or CCAs).

While prospects for independent research are favorable, Investorside members are not immune from the larger forces impacting the research industry, and, as such, Investorside will be formulating its strategy for navigating the uncertain research marketplace.  Investorside has faced challenges before--when many  investors  cut back  soft dollar payments prior to  the SEC's  guidance on  soft dollars released July 2006.  Most likely, the current challenges facing the industry will be a tonic for the organization.

[Note: Integrity's founder and chairman, Mike Mayhew is a board member of Investorside.]