fundamentals are reflected through share price and in such a scenario, comments and recommendation of a well known analyst can severely affect the share price movement of a company temporarily. Therefore, analysts enjoy considerable amount of independence while making recommendation. However, analyst independence can be reduced by specific company policies. If a company and the client require the notifications of recommendations in advance, it would not help the analyst to make independent decisions. The analyst has to clearly justify his recommendations in such cases. Analysts’ independence is compromised when a buy recommendation is maintained even if stock price is falling. Analysts sometimes recommend investing in tech stocks and the broader stock market. These analysts do not lack independence while making recommendations (C. Y. Chen & P. F .Chen, 2009).

Peter Houghton’s memo proposes that the analysts should clearly give justifications for their recommendations. The memo is designed as a global policy that has to be followed by the bank. The memo reduces analysts’ independence to some extent. The memo contains an official order or proclamation which raises question about independence of analysts. The memo recapitulates a policy which has always been followed. The practices reflected in the memo are considered to be common in the industry. The policies are restated to guide analysts who are new to the company. So the company justifies itself by emphasizing that analyst only need to make changes supported by facts (Khurana, Pereira & Raman, 2003).

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The aspect of the capital market which is concerned with the promotion, sale and analysis of shares is known as the sell side. Sell side analysts work on the undertakings that would enable the buy side to avail the financial products.

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