New rules regarding research analyst’s perceived conflicts of interest: an ever‐evolving landscape

Abstract

On May 10, 2002, the Securities and Exchange Commission (the “SEC”) approved certain rule changes filed by the National Association of Securities Dealers, Inc. (the “NASD”) and the New York Stock Exchange, Inc. (the “NYSE”) relating to research analysts’ perceived conflicts of interest. In proposing such rule changes, the SROs noted that these new rules were intended “to improve the objectivity of research and provide investors with more useful and reliable information when making investment decisions” and “to reinforce the integrity of the process and help rebuild investors’ faith in research and in the equities market as a whole”. To that end, NASD Rule 2711 and NYSE Rule 472 (the “rules”) restrict and prohibit certain activities of firms and their research analysts. This article sets forth a summary of the rules and the guidance relating thereto. It also provides a brief description of the recently proposed Regulation AC, which effectively will impose additional requirements on firms and their analysts. By integrating these sources into one, this article intends to survey the existing landscape as it relates to the rules governing research analysts, and, more important, to serve as a guidepost around which this landscape continues to evolve.

Citation

Hensley, D.C. and Strouse, J.W. (2002), "New rules regarding research analyst’s perceived conflicts of interest: an ever‐evolving landscape", Journal of Investment Compliance, Vol. 3 No. 2, pp. 13-21. https://doi.org/10.1108/joic.2002.3.2.13