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The development of US regulation of broker‐dealer research

Charles S. Gittleman (Counsel at Shearman & Sterling LLP, New York, New York, USA)
Russell D. Sacks (Counsel at Shearman & Sterling LLP, New York, New York, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 13 June 2008




The purpose of this paper is to describe regulatory activities since the initial regulatory actions between 2001 and 2003 in response to securities firm research analyst conflicts of interest that were identified after the “internet bubble.”


The paper describes a number of important regulatory activities, including: interpretive activities, such as the 2004 Second Joint Research Memorandum; establishment of a new licensing requirement for research analysts; additional rulemaking, in the form of 2005 changes to the SRO Rules that are meant to tighten those rules; the December 2005 report of the NASD and NYSE studying the operation and effectiveness of prior regulatory actions, including the SRO Rules; enforcement actions against both firms' and research analysts' behavior; industry sweeps gathering information regarding industry practices in respect of debt research; and rulemaking for purposes of implementing interpretive guidance and Joint Report.


Following extraordinary and sweeping regulatory actions between 2001 and 2003, securities regulators have continued a high level of activity with respect to securities research. Research regulation stands as a hallmark for the current era of securities regulation for at least three reasons: it has displayed a wide range of regulatory tools including rulemaking, publication of interpretive guidance, “sweep” examinations, licensing, and enforcement, and has been largely “principles‐based” rather than prescriptive in nature; it is marked by complexity: a web of SEC, SRO, and informal or “best practices” regulation now exists covering every aspect of securities research; and it is a cornerstone of an emerging regulatory theme of heightened and more detailed compliance for investment banking operations.


This is a valuable summary and analysis of seven years of regulatory activity on a complex issue by experienced securities lawyers



Gittleman, C.S. and Sacks, R.D. (2008), "The development of US regulation of broker‐dealer research", Journal of Investment Compliance, Vol. 9 No. 2, pp. 12-25.



Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

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