Quick Answer
A research report is written analysis of an equity or issuer sufficient to base an investment decision on. FINRA's conflicts rule walls research off from investment banking (IB): no IB pre-publication review, no IB-driven pay, anti-retaliation, and personal-trading limits. Add Supervisory Analyst approval, front-page disclosures, quiet periods, safe harbors, soft dollars, and Regulation Analyst Certification (Reg AC).
The whole unit on one sheet: what counts as research, the conflict framework, disclosures, quiet periods, safe harbors, and soft dollars.
What Counts as "Research"
- Two-part test: (1) information, opinion, or recommendation about an equity security or issuer, AND (2) information reasonably sufficient to base an investment decision on.
- Form is irrelevant: research note, morning call, slide deck, email blast, portal post, podcast transcript, or webinar qualify if both elements apply.
- Excluded: broad-index commentary, economic/political/market notes, technical analysis of sectors, statistical summaries, security listings, and internal due-diligence reports.
- A research analyst is anyone whose primary job is producing research or specific recommendations, regardless of title, triggering Series 86 (analysis) and Series 87 (regulatory).
The Conflict Framework: Research vs. Investment Banking
- Written policies required: identify/manage conflicts, promote objective research, and stop research becoming an IB marketing tool.
- Information barrier: no IB pre-publication review at all (fact checks: non-IB staff or issuer only), research owns coverage, written policies manage research/IB contact (no FINRA chaperone rule), no analyst pitch/road-show role, no joint due diligence with bankers before underwriters are picked.
- Compensation: may not tie directly or indirectly to specific IB deals; reviewed at least annually by a committee excluding IB; a bonus pool sized by IB revenue is the subtle violation.
- Anti-retaliation: no retaliation or threats for unfavorable research; a bonus cut or demotion after a costly sell rating is the trap.
- Personal trading: no front-running a pending report; no trading inconsistent with the analyst's most recent recommendation. Extends to derivatives, concentrated funds, and anyone able to influence content.
The One-Liners That Win Points
- Series 16 approves; Series 24 owns the framework. A Supervisory Analyst or Research Principal must approve every report before publication.
- The 1% ownership disclosure is firm-wide, not just the analyst: prop desk, affiliates, and error accounts aggregate.
- Front-page disclosures must be prominent, or clearly pointed to; a buried disclosure fails.
- Fair and equitable distribution: no selective pre-publication tipping, not even to the firm's trading desk.
- Regular course is the safe-harbor make-or-break: a firm that never covered an issuer cannot initiate coverage during its offering.
- The booster shot (first report after an offering) must clear the quiet period, or it breaks both the conflicts rule and the distribution safe harbor.
- Emerging Growth Companies (EGCs) are exempt from quiet periods.
Numbers to Lock In
| Item | Value |
|---|---|
| IPO quiet period (underwriter/dealer) | 10 calendar days after offering |
| Secondary quiet period (manager/co-manager) | 3 calendar days after offering |
| Lock-up-expiration quiet period | eliminated (formerly 15 days) |
| Historical IPO / secondary windows (wrong answers) | 40 / 25 days |
| IB compensation disclosure look-back | past 12 months |
| IB compensation disclosure look-forward | next 3 months |
| Past offering-manager-role disclosure | managed/co-managed in past 12 months |
| Reg AC quarterly certification deadline | within 30 days after each calendar quarter |
| Missed quarterly certification consequence | 120-day disclosure on every report + notify FINRA |
| Reg AC / soft-dollar records retention | 3 years (first 2 accessible) |
Distribution Safe Harbors and Soft Dollars
- Different-class safe harbor: a participating broker may publish on a different class than the one distributed, issuer current in reporting, in the regular course. Convertibles count as the underlying common.
- Regular-coverage safe harbor (two paths): issuer-specific research (issuer eligible for short-form seasoned registration) OR industry research covering many companies with no disproportionate prominence. Fund research was added later.
- Soft-dollar safe harbor protects the buy-side money manager, not the broker-dealer: needs investment discretion, an eligible research/brokerage service, and a good-faith reasonableness determination.
- Eligible soft dollars: research reports, analyst discussions, arranged executive meetings, analytical software, governance research. Ineligible (hard dollars): hardware, mass-market publications, dues, legal fees, travel, pure execution software.
- Mixed-use item: allocate reasonably, hard-dollar the ineligible portion, document the method.
Top Gotchas
- Quiet periods are calendar days, not business days; a Friday-priced IPO clears the second Monday, not 10 trading days later.
- The IPO quiet period reaches underwriters AND dealers; the secondary reaches managers/co-managers only.
- Analyst/banking separation is structural: an IB head on the comp committee is a per-se violation even with neutral votes.
- Reg AC has two triggers: a per-report certification AND a quarterly public-appearance certification; missing the quarterly one drives the 120-day disclosure.
- Social media and podcast spots are public appearances if they recommend a security; disclosures must come during the appearance, not after.
- Failing a distribution safe harbor makes the report an illegal prospectus, a federal violation, not just a FINRA problem.
One-Breath Recap
A research report is written analysis of an equity or issuer sufficient to base a decision on, and once a communication crosses that line, the conflicts rule walls research off from investment banking: no IB pre-publication review, no IB-driven pay from a committee that excludes IB, anti-retaliation, and personal-trading limits. Every report gets Supervisory Analyst (Series 16) approval and prominent front-page disclosures (firm-wide 1% ownership, IB compensation past 12 and next 3 months, ratings distribution). Stay off the air 10 calendar days after an IPO and 3 after a secondary (EGCs exempt), publish during a deal only inside the different-class or regular-coverage safe harbor in the regular course, certify each report and each quarter under Reg AC, and keep the soft-dollar safe harbor to eligible research, hard-dollaring the ineligible portion.
Need more than the recap? Read the full Research Activities unit.