FINRA’s Final Equity Research Rules Go Effective; Final Debt Research Rules’ Effective Date Quickly Approaching

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In November 2014, FINRA proposed to adopt NASD Rule 2711 as new FINRA Rule 2241, with several modifications, to address conflicts of interest relating to equity research analysts and research reports (“Rule 2241”). FINRA additionally proposed to adopt new FINRA Rule 2242, designed to address conflicts of interest relating to the publication and distribution of debt research reports (“Rule 2242”). Together, the proposals sought to effectively serve the public interest by successfully managing research conflicts of interest, while contemporaneously preserving the ability of FINRA members (“member firms”) to continue to provide research, and thus information, to the investing public. Finalized versions of Rule 2241 and Rule 2242 were approved by the Securities and Exchange Commission (“SEC”) in July 2015. While Rule 2241’s requirements became effective on December 24, 2015, Rule 2242 will not become effective until February 22, 2016.

Rule 2241 and Rule 2242 create a much more stringent regulatory environment for member firms and their equity and debt analysts. FINRA has additionally indicated in its priorities letter for 2016 that it will continue to focus on whether a member firm’s research analysts are inappropriately involved in the firm’s investment banking activities and whether investment banking personnel are exercising undue influence over analysts.

Please see full Alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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