Here’s proof some still see value in brokerage-produced stock research, even after the research scandal of four years ago tarnished the image of Wall Street analysts. BusinessWeek has learned federal authorities are on the verge of busting a scheme in which at least one employee of UBS (http://www.businessweek.com/ticker/) was allegedly selling information about upcoming changes in analyst ratings on stocks to traders not affiliated with the Swiss investment firm.

Sources says federal prosecutors in New York and securities regulators in Washington will soon file charges against a number of individuals caught up in the investigation, which has been going on since last fall. Criminal and civil charges could be filed as soon as Tuesday. Investigators have found that traders working for at least two unidentified hedge funds were paying a UBS employee in New York for the information about impending ratings changes on stocks. But other traders were also buyers.

Sources say the traders often got one-day advance notice of an impending change on a stock rating by a UBS analyst. The information allowed the traders to buy or sell shares ahead of the change’s public disclosure, so they could take advantage of any price swings in the stock. People familiar with the inquiry say authorities contend it was improper for the traders to act on the information, since news of the impending ratings changes was still confidential and not yet made public. Unfair Advantage?

A UBS spokesman declined to comment on the investigation. A spokeswoman for Michael Garcia, the U. S. Attorney for the Southern District of New York, also declined to comment, as did a spokesman for the Securities & Exchange Commission (SEC). But sources say the investigation is considered a high-profile matter for federal authorities and may lead to similar allegations of wrongdoing at other Wall Street investment firms.

The investigation is just the latest example of ongoing concerns on the part of prosecutors and securities regulators about hedge funds using inside information to get an unfair trading advantage. Earlier this month, the SEC asked a dozen Wall Street brokerages, including UBS, to turn over trading data, as part of separate inquiry into allegations that brokers are improperly tipping off hedge funds about block trades by institutional investors. A hedge fund with advance word of a block trade can make big bucks, because these institutional trades have the potential to move stock prices dramatically in either direction.

Jill Fisch, a securities professor at Fordham University School of Law, says hedge-fund managers tend to be quite aggressive in trying to get an information edge in order to score a trading profit. She says many things hedge funds do to get an info advantage, such as interviewing employees of a company, are perfectly legal. But there are instances where hedge funds “may be crossing the line,” she says, and that’s drawing heightened scrutiny from regulators and prosecutors. “They have become aggressive about everything, and there’s a lot push-back,” she notes. Keeping Secrets

The identity of the UBS employee allegedly peddling the information isn’t known, nor is it clear whether the person still works at the investment firm. People familiar with the investigation say the person worked closely with an analyst at UBS. Indeed, much is still unknown about the investigation, but sources say authorities haven’t uncovered any systemic abuses within UBS.

Still, the inquiry represents another black eye for Wall Street analysts. Nearly four years ago, 10 Wall Street securities firms, including UBS, Citigroup (http://www.businessweek.com/ticker/), Morgan Stanley (http://www.businessweek.com/ticker/), and Goldman Sachs (http://www.businessweek.com/ticker/), paid a total of $1.4 billion in fines and restitution to settle allegations that some analysts had conspired with investment bankers to issue favorable ratings on stocks. The analyst investigation revealed that stock research at big Wall Street brokerages often was written with one eye towards winning investment-banking business, as opposed to providing investors with honest advice.

But ratings changes on stocks have always been the kind of market-moving information that traders are keyed to snap up. Look for this latest investigation to force all of Wall Street to take another look at its internal systems to make sure ratings changes remain secret until the results are made public.

A CAMPAIGN to create the first “carbon neutral” town in Scotland is to be launched tomorrow in an attempt to kick-start a green revolution.

Under the plan, the town of Biggar, which has a population of about 2,000, would grow its own food, create its own electricity and dump no waste.

A group of activists, backed by the South Lanarkshire town’s two schools, church and several businesses, will hold a meeting in the Municipal Hall tomorrow in the hope of persuading the rest of the residents to join the campaign. Hundreds are expected to attend.

Estate agent John Riley, a driving force behind the project, said he believed it was only a matter of time before people realised it would save them money on their electricity bills and increase the value of their houses.

He has also been encouraging people to rent Al Gore’s documentary film An Inconvenient Truth ahead of the launch in the hope of inspiring them to join the cause for altruistic reasons.

Mr Riley, who has been in touch with the Cheshire village of Ashton Hayes - also trying to be carbon neutral - admitted: “By no means is everybody signed up to it and if the community decide they don’t want this, it’s dead in the water. But I hope they say we need to do this.

“It’s moving Biggar to a situation where we can be sustainable in terms of local food and energy, and will make it the place to be if you want to live that kind of lifestyle. It is a grand dream, but you have to start somewhere.”

He said energy-efficiency certificates for homes, due to come in next year, would have an impact on the market, and if Biggar made improvements now, “we’ll be a good year or year-and-a-half ahead of everyone else”.

While Biggar contributes a tiny fraction of the world’s carbon emissions, Mr Riley hopes such unilateral action will help put pressure on politicians.

“My real hope is to have it as a rolling thing that more and more towns come on board and really just stimulate the government into doing something more quickly,” he said.

Hamish Stewart, the Conservative councillor who represents Biggar, said he would “certainly be lending my support”.

Duncan McLaren, of Friends of the Earth Scotland, said he hoped places all over the country would follow Biggar’s example of its “excellent initiative”.

THE Findhorn Foundation eco-village in Moray has recorded the lowest ecological footprint ever in the developed world. The community’s footprint scores for “food” and “home and energy” were found to be 37 per cent and 21.5 per cent of the UK average.

HOW IT COULD WORK

Produce energy
Micro-renewable schemes such as small wind turbines to serve the town

Grow local food
Plant vegetables, buy food from local producers

Recycle and cut waste
Compost garden waste and ensure recycling services are available to all

Reduce reliance on private cars
Walking bus to take children to school, better public transport/car-sharing, off-set emissions from remaining air and car travel by tree-planting and other schemes.

Related topic

- http://news.scotsman.com/topics.cfm?tid=235
http://news.scotsman.com/topics.cfm?tid=235

Bookmaker Ladbrokes could avoid potential US legal action with a specially-tailored 440m takeover plan for 888, it has been reported.

It has devised a strategy which would see it strip out the majority of the latter’s assets, rather than acquiring the group as a whole, claims the Financial Mail on Sunday.

It quotes a lawyer as saying: “If a company faces criminal liabilities in the US, selling up is not the end of it. The new owner will face the same criminal proceedings.

“But this new structure gives Ladbrokes an interesting defence by separating the corporate identities of the two companies.”

The situation has been brought about by last summer’s US online gaming crackdown.

This forced a pull-out of gaming firms from the US market and a 4bn crash in share prices.

One analyst pointed out that the proposed move could see Ladbrokes “have their cake and eat it.”

However, the paper says non-executives on the Ladbrokes board have been holding up the talks for weeks by their insistence on scrutinising every legal detail.

Ladbrokes shares closed at a record high on Friday.