Banks Stifle First Amendment, Attempt To Create A Tiered Market Of "Clients" And "Everyone Else" As Is Blocked From Instant Stock Research Reporting

Tyler Durden's picture, which is a news aggregator service (much like most of the blogosphere these days, but without the snarky commentary), and is hosted on Zero Hedge, has just seen a major driver of its business model cut off, after several banks just won an injunction that blocks Fly from notifying its clients when a bank may have issued a research event such as an Upgrade or, on those extremely rare occasions nowadays, Downgrade. The banks who feel violated by everyone getting access to information about their sellside detritus contemporaneously, not just wealthy accounts and wire services, are Barclays,
Bank of America Corp.’s Merrill Lynch, and Morgan Stanley. As Bloomberg reports, "U.S. District Judge Denise Cote in New York today granted a
request for an injunction sought by the three banks. They argued
at a March trial that, a Summit, New Jersey-
based firm with about 30 employees, wrongfully obtains and sells
reports on changes to the banks’ stock evaluations.
" This is merely a case of picking on the weakest: the next ones to lose their First Amendment right will be, in order of importance, StreetAccount, Thomson Street Events, Briefing, and, ultimately Bloomberg. The reason: keep the market as two-tiered as possible so that clients of the above three banks (which list will likely expand promptly as more banks join in) have an upper hand over all the slower retail and algo operations. With this forced lag in information (which is a joke because anyone who cares, knows the second a research report goes public anyway), and with the ever increasing transaction times courtesy of nanosecond collocation facilities, soon the self-cannibalizing market will only rely on stealing money from those accounts who are still willing to participate in a market that is now split into two distinct groups: those who make money, and are clients of MS, ML and Lehman (and the rest of Wall Street), and everyone else. This is a huge hit for not just traditional media, but for the blogosphere as well, which revels in the freedom of not just ridiculing banks' (Merrill Lynch) upgrades of horrendously shitty companies (REITs), but enjoys doing so in real time. We expect that the next step is that any blog or medium that has any negative things to say about Merrill, MS or Barclays (pretty much most independent media), will be served with a summons as soon as any criticism is made public.

As for Fly, ther following is a summary of the injunction terms:

The banks sought to block publication of their
recommendations for four hours from the release or until noon,
whichever is later. Cote chose a shorter period. For reports
issued before the market opens, the bar will be in effect until
10 a.m.. For those issued while the market in New York is open,
it will be in effect for two hours after publication. “This time frame preserves incentives for the firms to
create and disseminate research reports to their investor
clients, while still recognizing the inevitable, fast-moving and
widespread informal communication of recommendations on Wall
Street,” she wrote.

So these banks, all of which still use TALF, and are thus beholden to the taxpayer even though they may argue that TARP has been paid off so they can pay billions in bonuses, are now saying "hey taxpayers, rot in hell - if you want to get access to what is essentially public information, you will have to get in line, and only trade after Fidelity and Vanguard have already put their positions on." While we are not PR specialists, this is not the right way to gain public support for the next time all the Wall Street kleptorcrats need a bail out.

Furthermore, this injunction is about the dumbest thing one could imagine: news of sell side research changes are reported immediately by Bloomberg, Reuters and all the major newswires. Why did Lehman, Morgan and Merrill not take them on? Oh yeah, limited budget. And now that they have a case precedent, the door is open to demand cashola or threaten with shutting down the big boys. As for the rest of the blogosphere - good luck. As the Fly's lawyer Glenn Ostrager points out:

“The plaintiffs’ plan” is “to select probably one of, if
not the, smallest player on the street with the most limited
resources and pursue this claim so that they then, with that
advantage, can go to Bloomberg and others,” Ostrager said.

As for the banks point of view: apparently it is all Fly's fault that bank sellside desks have been a massive loss center. The fact the the quality of research is biased and, frankly, horrendous, has apparently nothing to do with it.

“Each firm has lost business in, and has reduced
investment in and output of United States equity research as a
result of the free riding by Fly and other services,” Marks
told Cote at the nonjury trial. “This is a bread-and-butter
case of hot-news appropriation.”

And while the judge obviously keeled over to the banks' demands, she did have some logical questions:

"Can the plaintiffs really effectively prevent their
headlines from emerging into the marketplace and being publicly
widespread?” Cote said.

She also asked why only was sued.

“Why should an injunction issue against a small business,
a start-up, a small entrepreneur, when Goliath is permitted to
do the same thing,” Cote asked. “If an injunction issues
against Fly, and one year from now Bloomberg or Thomson or
Reuters is doing the same thing, why is that fair?”

We are confident that as banks seek to shut up more and more of the internet, that the fringe blogosphere will be next to be forcefully quieted, with or without the administration's help. Until that time, we will continue to present you with all the critical information you need, without prejudice, and without worries of retribution, even as we slide deeper into a complete and utter market (and soon, social) totalitarian regime of the haves and have nots.

Full copy of the injunction, and the first shot across the bow to block free internet-based speech:


Permanent Injunction

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strike for return to reality's picture

So long as the govt feels free to deny citizens life, liberty and the right to pursue happiness, there is no reason to expect the first ammendment to be respected.

For those capable of understanding high school physics there is only one conclusion, and it includes understanding that the US government has no respect for the lives of Americans (never mind those poor souls living in rest of the world).

nope-1004's picture

The judge, like Obama et al., was simply bought by the banks.

Think anything legit is going on here?  Hell no.  White collar crime and extortion is alive and well.


Geithner needs to go to prison.

Thank you.

knukles's picture

Well, I tell my kids to STFup and winds up it don't do beans. 

Postal's picture

So if I don't like bad news about me, I can just claim a copyright of same and demand a cease publication order? Lovely.

Fly should team up with The Pirate Bay... ;)

Assetman's picture

Or Fly should put their servers somewhere near Zero Hedge's.

Popo's picture

> "We are confident that as banks seek to shut up more and more of the internet, that the fringe blogosphere will be next to be forcefully quieted"


I wouldn't be 'confident' about that at all.  Information wants to be free... and attempts at shutting up the blogosphere aren't likely to be very successful.

All it takes is one recipient of a "research" report to scan it and upload it to Scribd (or their own personal Wordpress site).   By the time Wall Street knows about it, it'll be too late.


Besides -- what Wall Street hasn't yet become afraid of -- and what they *should* be afraid of -- is false or doctored research reports bearing the names of big banks. 



economessed's picture

OK, I get it.  Legalize insider trading.  We're just going to call it "proprietary research" to avoid the stigma of illegal activity.

MarketTruth's picture


Am now thoroughly convinced there is no longer a Constitution in America. Seriously. Your first amendments rights were just violated. Hopefully Fly will appeal this unconstitutional decision. It is unlawful on many accounts including the first amendment and that the judges ruling needs to apply to ALL journalists and news agencies.


seventree's picture


TraderMark's picture

This day in taxpayer outrage


The housing industry is going to get almost all the taxes paid in the housing boom years refunded


$8.5B in taxes during bubble years; set to be refunded with $6B in the name of justice and the American way.

Mad Max's picture

Absolutely disgusting.

Yes, big business capture of con-gress is complete.

Rainman's picture

Whilst the weary sheeple are on alert to the HCR mega-con, another wolf sneaks around from behind to loot the taxpayers.

Another disgusting bunch of mutherfukers cashing in on their investment in the corrupt 111th Gang of CongressCritters.

BlackBeard's picture

That's fucked up.  Don't make Bloomberg bust out the warchest and sue the banks back.

Ripped Chunk's picture

It depends on the court decision. Hopefully it goes to trial and we see either:

1. We still have a functioning court system.

2. We have an owned court system. (starting to wonder about the Supreme Court which I think is cause for concern)

If 2. then it is pretty much game over. At that point. enjoy your gold those that are relying on it. But when the real anarchy begins, it may help a bit in the black market. Or you will be killed for it. 

bingaling's picture

God forbid a small retail investor has information to trade with -Same old rigging of the casino while destroying the Constitution.

10044's picture

So how much do you think the judge was bribed at??

Ripped Chunk's picture

Any idiot can file suite. It remains to be seen where this goes once the "process" starts.

Although there may have been several bribes paid already for all we know?


Roy Bush's picture

OFFSHORE!  Set up a place in Iceland like wikileaks has done!  This being said, what is published by these banks is their property.  If is distributing their material without being a customer it is against the law.  What if you were a bookwriter and people were distributing your book without permission?  

Reductio ad Absurdum's picture

If you are a small time investor, you should plan your investments/gambles to play out over a period of several weeks or, better yet, several months or years. If you do so, then the hour-to-hour fluctuations caused by the release of these "reports" will not affect you.

The ruling is correct in the sense that it cost the banks money to create the reports and they should be able to get compensation for their work.

The problem arises in the scale of the thing: big banks give proprietary information to large investment firms that then use the information *in tandem* to move the market over the short term. It doesn't matter in the slightest whether the information is valid or not -- it's just a way for the large players to coordinate their activity. If this were done behind the scenes it would be called insider trading and market manipulation.

Thus the question is not one of "free speech" but rather one of preventing such market manipulation in the first place.

Reggie Middleton's picture

The ruling is correct in the sense that it cost the banks money to create the reports and they should be able to get compensation for their work.

But the banks are compensated through marketing transaction services and commissions, not through selling research. Thus this does not make much sense.

The real solution is for the retail and buyside populace to stop playing the games of the banks and demand real research and not marketing fluff. As someone who spends a fortune on generating the real stuff, I am perplexed as to how much people with real money pay attention to some of the dribble. Maybe I should private equity up and compete with the banks head on.

zarrmax's picture


I really like your site and I find your research in-depth and more often than not; correct (which is a huge nod in the relm of research). BUT...

"But the banks are compensated through marketing transaction services and commissions, not through selling research. Thus this does not make much sense."

You deserve a slap on the wrist for this one. Selling research is a revenue source well established and well defined. There is nothing wrong with IB's selling there research but there is something wrong with a third party coping & pasting their reports without paying for them (and profiting from it BTW)

Imagine if I stole your research and disseminated it without your permission and without paying you. What course of action would you take to make sure your hard work & rights are protected? 


Manbarepig's picture

Zarrmax - theres a big difference between a research report that you need to be permisisoned for/purchase through a vendor like TR or BBG (or directly from the banks) and what Flyonthewall does.  A headline stating the conclusion of the report is not the same as giving away the research, data, and supporting valuations that came to that conclusion. I don't think Reggie would have any problem with someone publicly announcing he concluded so-and-so about a subject if they STILL had to pay to get the content of the report from the source.


Long story short - Fly does NOT copy and past the content of reports wholesale. This suit has little to no merit or basis in reality.

zarrmax's picture

whether its the first sentence or the entire report, the document and it's conclusions fall under intellectual property rights. Fly must have permission to reproduce and that is really what the suit says. fly must wait to reproduce if they don't have permission; that's it. the judgement cites "17 reports" that were reproduced without permission not fly's entire operation.

Re-read the opening paragraph.... They admitted to reproducing the 17 reports without permission!

JW n FL's picture

**** ”Defendant violated the common law of New York by misappropriating Plaintiffs' commercially valuable, time-sensitive equity research recommendations and analyses” ****


At what point does “Fly On The Wall” bare responsibility for the information presented to “Fly On The Wall”… Ok, I will let that slide for the moment (although it is truly a hole anyone idiot could drive a semi-truck thru)…When this information is released? The readership then again dilutes the very nature of time sensitive and commercially viable… In the plainest terms the information has a shelf life for its value which is? “X” amount of hours from when it is released. Considering all of these Banks are funded thru public funds… The Fed’s 0% window and the publics expense… and the thru the Banks allowing their private information to be made public over and over again… the very best the court could rationalize would be an amount of time before reproduction in part or in whole to the very public that funds said banks.


**** “ Copying, distributing, displaying, or in any other manner publishing, selling, offering to sell or distribute (via any form of marketing or advertising), abstracting, broadcasting, making derivative works from, licensing, or transmitting, without prior written authorization by the Copyright plaintiffs, any portion of the copyrighted elements of any research reports generated by Copyright ” ****


Time sensitive? This is distributed and re-distributed and dare I say provided too… “Fly On The Wall” from sources within the Banks? The Banks have no control over their information delivery system’s and once again… the same Banks funded thru public monies… what to be private? They didn’t want to be private when the TARP monies and / or insert other here _____________ where flowing like a river, right?


**** “Disseminating in whatever form, via any medium now known or hereafter developed, whether to subscribers or anyone else, and whether for monetary consideration or otherwise “****


“Fly On The Wall” is re-producing in part? What has been provided to “Fly On The Wall” from Bank sources… No?


The fact that the information is made public to some extent by the Banks… whom then wish to Censor… or control who reads the information released? And these are publicly held and traded companies, Yes?


I would touch on what was mentioned already the SEC has no issues with this brand of internal wrangling? And the Court system, designed to protect the Law… at the Federal Level?


The First Amendment to the United States Constitution is part of the Bill of Rights. The amendment prohibits the making of any law "respecting an establishment of religion", impeding the free exercise of religion, infringing on the freedom of speech, infringing on the freedom of the press, interfering with the right to peaceably assemble or prohibiting the petitioning for a governmental redress of grievances.


And whistle blower type law has grounds as well? The Private information that is, by design to be made semi-public… that is leaked? To a news organization…



Look, it is the same shit… different day. If you are not a “AAA” Rated Corporation ( with human rights ) with a built in Lobby (inside the beltway) and a first rate legal team… you are main street… welcome to the World of the little people and of the soon never to be televised class war (continuation really).

Reggie Middleton's picture

Thanks for the compliment, but your premise is wrong on this one. Let's keep it simple. Name 4 Ibanks that sell their research. Tell me how much they charge for it and how it is paid for. 

This is the truth of the matter. Sell side research is marketing for the banking, trading and sales departments. Plain and simple. It is not even research for if it was there would be significant conflicts - which of course there are - that would disincentivize many clients from doing business with the banks. Once we realize that it is marketing for other bank services and not true research, we will be on the same page.

You can hate on Eliot Spitzer all you want, he was dead right in his attack on the faux Chinese wall between bank's research, and sales/trading/banking departments. His work was considerably weakened after he was busted/brought down/or however you want to view it.

What_Me_Worry's picture

Those poor, poor banks.  Can't these mega-conglomerate banks just run their corrupt business in peace without the meddling of those that want a fair and balanced financial system?

My thoughts and prayers will go out to all the TBTF's tonight.

We should all show our generosity and offer the banks affected by this atrocity free no-interest or very low interest loans until they feel better and let them say their assets are worth whatever they decide.

It would only be fair.

crosey's picture

Viva Cabal!  And perpetuated by a NY judge?

Hiding in plain sight.

Careless Whisper's picture

they act like their opinion is valuable to the public. too funny. only valueable to their trading desks the day before.

macfly's picture

Isn't it time for the revolution yet?

Wake me when the sheeple finally realize what is going on, and decide to do something about it.

strike for return to reality's picture

Here is an exercise to try...

Ask sentient adults you know what they think about the US govt without giving away your own view before hand.  I've been doing this for a while, and I am amazed (and quite pleased) with what I am finally hearing.  (After years of hearing the MSM message.)

Of course, my results may not be reflective of all the country.  I tend to hang out with people who are capable of thinking.

macfly's picture

Here in LA the corruption in government has become common conversation, even amongst many of the Dem faithful, but I have no idea how informed the full length and breadth of the country are or care to be.

Hephasteus's picture

I hope a bird shits on their hand and they rub their eyes and get conjunctivitis.

Rainman's picture

Nobody's allowed to taste the snake oil unless they buy it first.

buzzsaw99's picture

Bank stock evaluations are worthless.

zarrmax's picture

I gotta to play devils advocate here.

Firms get paid for their research. You have to pay additional to disseminate said research to third parties. They admit using excerpts or whole documents infringing upon copyright laws. Moreover, the judgment cites "17 research reports" meaning the investment banks are not pissed about the service offers (they probably pay for access to certain reports) 
but that they disseminated proprietary information that they did not pay for.

The judge understands that you can't stop the flow of information so the court simply ruled that the defendant must delay the time sensitive data they receive and do not have permission to use so that the investment banks clients who pay for it can actually use it. If they want to use they data, they simply have to pay for it.

Makes sense to me....

Captain Willard's picture

The true libertarians among us have to defend their intellectual property. We shouldn't conflate the issue of prop trading with intellectual propery rights.

I have no problem with this ruling. I do have a problem with prop trading, preferential co-location, etc. And I have a major problem with deposit insurance.

Let's stay focused on the big, system-critical issues.

And Reggie: if the SEC forced mutual funds to unbundle execution and research costs, these idiot analysts would be forced out of business. Consumer would also be protected better. But, with respect, that is a separate issue.

tmosley's picture

True libertarians defend property.  Information is not property.  Information in the mind is not a crime (ie there is no such thing as thoughtcrime), and speech is not a crime, therefore there is no part of the actions of flyonthewall that could be considered a crime.  That is, unless they broke into their office and/or server, or signed a nondisclosure agreement.  I'm thinking they didn't do either of those things.

zarrmax's picture

sad comment Tmosley....

Intellectual property (IP) is a term referring to a number of distinct types of legal monopolies over creations of the mind, both artistic and commercial, and the corresponding fields of law.[1] Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; discoveries and inventions; and words, phrases, symbols, and designs. Common types of intellectual property include copyrights, trademarks, patents, industrial design rights and trade secrets in some jurisdictions.

thought is not a crime....steeling ones copyrighted thoughts and reproducing them without consent is....

I'll say it again. the court cites "17 reports" that were reproduced. not flyonthewalls entire operation.
the ruling states that fly must have permission to reproduce otherwise they must wait before posting.

JW n FL's picture

No waiting? NEVER! Re-produce in any form or fashion... not make jokes about... no cartoons? NOTHING!


ORDERED that Defendant, its agents, servants, officers,

employees, and all those acting under its control and/or on its

behalf and/or in concert with it, are permanently enjoined and

restrained from:

1. Copying, distributing, displaying, or in any other

manner publishing, selling, offering to sell or distribute (via

any form of marketing or advertising), abstracting,

broadcasting, making derivative works from, licensing, or

transmitting, without prior written authorization by the

Copyright Plaintiffs, any portion of the copyrighted elements of

any research reports generated by Copyright Plaintiffs, whether

now existing or as may be created at any time in the futurei



Gordon_Gekko's picture

Whoever is "trading"/"investing" this "market" is an idiot anyways and deserve to lose their money. It's time to shut the goddamn rigged"exchange" down, not participate in it. Non-participation in this corrupt system is the only way this den of vipers will ever die, i.e., when they run out of suckers to pillage. I, for one, won't miss reading the lunacy issued by the banksters. Good riddance.

geopol's picture


Fast forward to 15:00 and get Trimtabs view.....We now have unmasked them...


Manbarepig's picture

TR and BBG were not only excluded for legal precendent, like you said, but because they have in depth business relationships with these banks. These same banks went to a "prior approval" process in 2006 to restrict who reads their Sell-Side Research (why would you want to restrict misleading propoganda pieces again?) which has been a headache for vendors. Another restriction on redistribution of content to the major data vendors would have dragged through legal for years. Beat up on the small kid, get the injunction, use it to ram through a deceision, turn around and cite case law at the big boys. Now where's my pitchfork again?

poor fella's picture

It's ok, soon all our borrowed 'rights' will be reappropriated, but on the positive side, it sure will be nice to meet everyone here at the FEMA camps for "belligerent" US citizens.

strike for return to reality's picture

Hmmm, does that mean that all the creative work in this country (I'm not talking about accounting) will start to be done at a government camp?

AnonymousMonetarist's picture

'We are confident that as banks seek to shut up more and more of the internet, that the fringe blogosphere will be next to be forcefully quieted, with or without the administration's help'

Bring it on.


Racer's picture

They want us to be like in those people in that film THX 1138!

poor fella's picture

Every time that movie and Soylent Green are on, I can't pull myself away. We're approaching a strange Phillip K. Dick type world vision..