In his 10 years as an equity analyst at Piper Jaffray, Gene Munster has seen some very good times and some very bad times. Now he’s seeing much better times.

Munster, 34, is a relative old-timer at Piper Jaffray & Company, the brokerage division of Minneapolis’s long-dominant securities firm, Piper Jaffray Companies (NYSE: PJC). Now managing director and a senior research analyst for Piper Jaffray & Company, he joined the firm in 1995. He has lived through the dot-com boom and an all-time high in the stock market (category: good times); an extraordinary string of regulatory reprimands, during which Piper racked up millions in charges (bad times); no fewer than six directors of research (good, bad, or neutral, depending on the guy); and, most recently, numerous positive independent reviews of Pi-per’s research department, which obviously would fall into the “much better” category.

Peterson argues that the types of practices Piper was punished for were rampant with all Wall Street firms: "The institutional clients . . . knew exactly what was going on— they were the ones who were creating it."


Piper’s research department has begun to build an impressive list of plaudits relative to its peers. Last May, San Francisco–based analyst rating firm StarMine recognized no fewer than nine Piper analysts for their ability to pick hot stocks and forecast company earnings. In addition, Piper:

• Ranked ninth in the June 2005 review of research firms that cover more than 500 stocks, jumping from 21st in a previous survey;

• Ranked fourth overall among 73 firms highlighted in the 2005 Wall Street Journal “Best on the Street Survey”;

• Saw seven of its analysts recognized among the leaders in their respective sectors in the “Best on the Street Survey,” led by Peter Swanson in the top position in the business and industrial services sector.

The payoff? More business. In the 2004 Greenwich Survey of institutional trading, Piper Jaffray increased its penetration as a “Top 15 Broker” to small- and mid-cap funds, rising to eighth place, up from 15th the previous year. Its “product/analyst service” quality ranked third out of 20 firms versus fifth in 2003. The firm ranked first in “most creative ideas” and “best quality of research following underwritings,” and among other improvements, its ranking in health care services research jumped to second from 22nd in 2003.

All good news. And a marked change from the Piper Jaffray of 1995–2004. During that period, several of the firm’s departments were nailed by the U.S. Securities and Exchange Commission (SEC) with more than $150 million in charges and settlements, including Piper’s Capital Management unit (the money-management arm that remained with Minneapolis-based U.S. Bancorp when it spun off Piper Jaffray Companies in 2003), its investment banking department, its research department, and, to a lesser extent, its retail brokerage operation. Piper’s Capital Markets division, which includes its research and investment banking departments, was responsible for nearly $37 million of those penalties. Piper’s problems landed the firm any number of times on the front page of The Wall Street Journal and earned it a long run of negative stories in the local media.

Has Piper completely transformed itself? Too early to tell, especially in light of a 2004 fine of $2.4 million for giving hot IPO stock allocations to favored corporate clients. But the current Piper Jaffray is operating in a much stricter regulatory environment than it was just a few years ago, one that requires brokerage houses to sever the conflicts of interest that existed when research analysts and investment bankers were joined at the hip. Based on its high rankings, it appears that Piper is working within those new confines.

In many ways, the rise of Piper’s pickers mirrors the big changes that have taken place in the financial services industry.

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