FINRA's concept proposal on fixed‐income research reports

Russell D. Sacks (Partner at Shearman & Sterling LLP, New York, NY, USA)
Michael J. Blankenship (Associate at Shearman & Sterling LLP, New York, NY, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Publication date: 13 September 2011

Abstract

Purpose

The purpose of the paper is to explain Financial Industry Regulatory Authority (“FINRA”) Regulatory Notice 11 11, which requests comment on a concept proposal to further regulate fixed income research reports, including through both substantive regulation and additional disclosure requirements.

Design/methodology/approach

The paper explains the background, including the application of FINRA's current research rules to only equity securities; definitions, including FINRA's proposed definition of a “debt security” as other than an “equity security,” a “treasury security”, of a municipal security; proposed standard and requirements, including most of the provisions of NASD Rule 2711; the institutional investor exemption, including an opt‐out provision; both permitted and prohibited communication between fixed‐income research analysts and fixed‐income sales and trading personnel; and the likely impact of the concept proposal on firms and investors.

Findings

The proposed rule extends regulatory requirements to fixed‐income research that are similar to those applicable to equity research, while subjecting research distributed solely to institutional investors to a more general “health warning”.

Practical implications

The proposed rule will likely precipitate cultural and business shifts at firms that both provide debt research services and may encourage a shift towards research disseminated solely to institutional investors.

Originality/value

The paper presents practical guidance from experienced financial services lawyers.

Keywords

Citation

Sacks, R. and Blankenship, M. (2011), "FINRA's concept proposal on fixed‐income research reports", Journal of Investment Compliance, Vol. 12 No. 3, pp. 44-48. https://doi.org/10.1108/15285811111172295

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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