FINRA publishes guidance on research conflict of interest rules

Abstract

Purpose

To explain recent guidance released by the Financial Industry Regulatory Authority (FINRA) regarding research analyst conflicts of interest that arise during the underwriter selection process.

Design/methodology/approach

The article discusses the risks associated with different communications between research analysts and issuers during the three phases of the underwriter selection process: the pre-IPO period; the solicitation period; and the post-mandate period.

Findings

While many questions remain, the FINRA guidance provides valuable insight to firms regarding the types of communications between research analysts and issuers that are permitted during different periods in the solicitation process. The risk levels associated with different types of communications during those time periods range from low to high to “unmanageable”. The article provides practical guidance on what research analysts can say and do during the different periods.

Practical implications

Broker-dealers should evaluate their policies and procedures to ensure compliance with the new FINRA guidelines.

Originality value

Practical guidance from experienced securities lawyers who are on the front lines in dealing with these issues.

Citation

Burke, T. and Pinney, J. (2016), "FINRA publishes guidance on research conflict of interest rules", Journal of Investment Compliance, Vol. 17 No. 1, pp. 45-50. https://doi.org/10.1108/JOIC-08-2015-0057