Aranca Independent Research Provider Survey 2009 finds the impact of Global Research Settlement of 2003 dissappointing

Published on 06 Jan, 2010

hough twin blows of GRS expiry and the turmoil in global financial markets point to an uncertain future for IRPs, diversifying revenue streams and catering to buy-side demand would be key to IRPs’ future prospects

New York: January 6 2010: Aranca, a leading global provider of on-demand custom investment and business research services, has recently released the findings from its global survey on the impact of Global Research Settlement (GRS) expiry on Independent Research Providers (IRPs). Enforced in 2003, the $1.4 billion worth GRS expired on July 31, 2009 leaving scores of IRPs with no regulatory safety net to push independent research. Coming in the midst of a global financial crisis and recession, the GRS expiry has raised the stakes for IRPs in terms of survival.

Through an extensive online survey hosted on the Aranca website, Aranca sought to find out the views of leading IRPs on the road ahead for the industry. Titled “The Road Ahead: Life after the Global Research Settlement Expiry,” the survey tried to find answers for some key questions including:

  • How will the GRS expiry alter the IRP industry landscape?
  • What are the key challenges faced by the IRP industry post GRS expiry?
  • Which are the potential services or segments that would help the IRP industry sustain and diversify service offerings?
  • Will the Chinese Walls survive in the post GRS era?
  • What is the road ahead for the IRP industry?

Even after five years of GRS regime, there are a few who think that GRS has been largely successful in creating and maintaining Chinese walls between investment arms and research departments, while several others believe that the GRS has been an complete disappointment. Several IRPs braced themselves to face the impact of GRS expiry by putting in place measures for developing alternative revenue sources, dealing with changing industry dynamics and building their capabilities.

Madhusudan Rajagopalan, Director, Aranca India Operations said, “While we knew that the IRP landscape is set to alter post GRS expiry, what surprised us were the diversity of opinions on emerging business models and IRP industry's efforts to gather new skills and remain firm in the face of adversity.”

Among the key findings of the Aranca IRP Survey 2009, are:

  • The GRS expiry will continue to hurt the IRPs in the short term, as the industry will experience pressure on revenues.
  • Highly fragmented IRP industry is ripe for consolidation, and global financial market uncertainties may hasten that process
  • Clients will demand independent research solutions that are not limited to the standard confines of valuations and research notes, but are innovative and exclusive
  • IRPs that stay ahead on capabilities, are open to new strategies of building and augmenting product basket, exploring newer avenues for both revenue generation as well as cost-savings, will thrive.

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