Analyst Objectivity: Managing
the Research Process:
Research Management
Research Reporting Lines
Position: Investment analysts should not report to departments that might create conflicts of interest, or that might impair the objectivity of the research or the analyst.
Rationale: Reporting to investment banking, corporate finance, or proprietary trading departments may impair the objectivity of the research and recommendations, or lead to market abuse.
Where stated: EAC - FSA CP 171
Analyst Involvement in Non-Research Activities
Position: Investment analysts should not be involved in non-research activities unless it is to research ideas for sales, trading, or investment banking opportunities, or provide advice to institutional clients. It is not acceptable if it involves pitching investment banking opportunities, marketing new securities topics, or promoting sales or advice to corporate clients.
Rationale: Researching opportunities for non-research functions does not require the analyst to engage in activities that may ultimately undermine or impair the objectivity of future or current investment research.
Where stated: EAC - FSA CP 171
Recordkeeping Requirements
Position: Investment firms should maintain records on their research and personal trading activities for seven years.
Rationale: Many conflicts of interest with research recommendations are associated with trading activity. Consequently, consistent periods for recordkeeping are warranted.
Where stated: APAC - SGX Trading Rules
Disclosing Different Client Categories
Position: Investment firms should notify clients at the beginning of their relationships about the client category they belong to. Firms should provide updates when the relationships changes.
Rationale: These disclosures will help clients understand that they may receive research that was previously offered to other clients, thus giving others a chance to act on the conclusions and recommendations.
Where stated: EAC - Swiss Analyst Independence