Research analysts must pass a FINRA Research Analyst qualification examination and must comply with the SEC’s Regulation Analyst Certification (Regulation AC), which requires research analysts to certify the truthfulness of the views they express in research reports and public appearances, and to disclose whether they have received any compensation related to the specific recommendations or views expressed in those reports and appearances. Analysts and the broker-dealer firms employing them also must comply with detailed FINRA and New York Stock Exchange rules, which limit certain analyst activities and require various disclosures designed to highlight potential conflicts of interest.
Over the past decade, the press, U.S. Congress, and our state and federal regulators have questioned the independence of broker-dealer research analysts and their objectivity in issuing research reports to the public, despite firms traditionally maintaining information barriers to separate research analysts from investment banking personnel. These issues came to a head in 2003 and 2004, when federal and state regulators announced a settlement of enforcement actions brought against 12 major broker-dealers based on undisclosed conflicts of interest and biased research reports prepared by certain of their research analysts. The settlement included extensive regulatory undertakings by these firms. In the years following the settlement, the SEC has approved a number of industry-wide rules designed to address many of the same issues addressed by the regulatory undertakings of the settling firms in 2003 and 2004. SIFMA has worked closely with the regulators and the industry to craft responsible rules that help foster the independence of research analysts and research reports.