What Counts as "Research"
Quick Answer
Under FINRA's research-analyst conflicts rule, a research report is any written (including electronic) communication that contains information, opinions, or recommendations about an equity security or issuer AND provides information reasonably sufficient to base an investment decision on. The form does not matter: a research note, a morning call, a slide deck, an email blast, or a website post can all be research reports. Macro commentaries, broad-index discussions, technical analysis of sectors, statistical summaries, and internal due-diligence reports are explicitly excluded. A research analyst is anyone whose primary job is producing research reports or specific recommendations (regardless of title) and triggers Series 86/87 qualification plus the full research-analyst conflicts supervisory framework.
The research-analyst conflicts rule only applies if a communication is a "research report." Before you reach the conflict rules, the disclosure rules, the compensation rules, or the quiet periods, you have to determine whether the document in front of you crosses the research-report line. The principal who supervises analysts has to apply the same two-part test the exam asks every fact-pattern question about.
The Two-Part Research-Report Test
| Element | What It Requires |
|---|---|
| Element 1: Subject and content | Information, opinions, or recommendations about an equity security or an issuer of equity securities |
| Element 2: Sufficiency | The communication provides information reasonably sufficient upon which to base an investment decision |
Both elements have to be present. A morning-call note that says "we like XYZ at $40" without supporting analysis fails Element 2 (not sufficient to base a decision on, even if it is a recommendation). A 60-page macro overview that does not name an individual equity fails Element 1 (no subject company). Both fail the test in different ways and are therefore not research reports.
The form of the writing does not matter. Written in the research-analyst conflicts rule sweeps in:
- Research notes and morning call sheets
- Slide decks distributed to clients
- Email blasts that summarize an analyst's view
- Electronic publications posted to the firm's research portal
- Website-posted analyses and recorded webinars
A research note delivered via PDF, email, portal, or secure-FTP is the same research note for the research-analyst conflicts rule purposes. The medium does not matter; the content does.
Exam Tip: Gotchas
- A communication is not a research report just because an analyst writes it. The two-part test is about content (information / opinion / recommendation about an equity) AND sufficiency (reasonably enough to base a decision on). A pure macro note from a research analyst that does not name an individual equity is not a research report.
- The form of the writing is irrelevant. Email, slide deck, PDF, podcast transcript, recorded webinar, website post: if both elements are met, all of those are research reports under the research-analyst conflicts rule.
- An equity-only definition. The research-analyst conflicts rule covers equity research. Debt research is governed by FINRA's debt-research rule, which is not in this unit's outline.
Excluded Communications: Not "Research Reports"
The research-analyst conflicts rule carves out several categories that look like research but do not trigger the rule:
- Communications limited to broad-based indices (e.g., a Russell 2000 commentary)
- Commentaries on economic, political, or market conditions (a Fed-policy memo, a recession-risk note)
- Technical analysis of sector or industry demand and supply based on trading volume and price (a momentum note on the energy sector that does not name individual stocks)
- Statistical summaries of multiple companies' financial data without recommendations (an industry-comparable spreadsheet)
- Listings of securities without recommendations (a watchlist with no view)
- Reports recommending only an increase or decrease in broad-based, sector, or industry index holdings, where no individual equity securities are named
- Solicitation materials, internal communications that are not given to current or prospective customers, and due-diligence reports prepared for the firm's own use
A communication that is not a research report can still trigger:
- Regulation AC (analyst certification), if it is a recommendation about a security in a public form
- FINRA's communications-with-the-public standards, which govern all retail and institutional communications regardless of research status
Exam Tip: Gotchas
- A sector-rotation note that names "Energy" and "Financials" but no individual equities is NOT a research report. It is a sector commentary excluded under the research-analyst conflicts rule.
- An internal memo to the firm's prop desk is NOT a research report. The research-analyst conflicts rule carves out internal communications that are not given to current or prospective customers.
- A pure macro/political commentary is NOT a research report even if a research analyst wrote it. The exclusion turns on subject matter, not author.
Who Is a "Research Analyst"?
| Element | What It Requires |
|---|---|
| Primary job function | Producing research reports or providing specific recommendations about subject companies / securities |
| Organizational chart designation | Anyone reported as a research analyst on the firm's organizational chart is a research analyst regardless of title |
| Qualifications triggered | Series 86 (analysis) and Series 87 (regulatory) qualifications |
The "regardless of title" clause matters. A trader who occasionally writes a research note is not a research analyst. A "strategy associate" whose primary function is publishing recommendations on individual equities is a research analyst even though the title says "strategy."
The principal who supervises research has to apply the primary function test on a person-by-person basis. Get this wrong and a person who should be Series 86/87 qualified is producing research reports without the qualifications, and the firm's research-analyst-conflicts supervisory framework does not reach them.
Exam Tip: Gotchas
- Title does not control. A "VP of Equity Strategy" whose primary job is producing research reports is a research analyst under the research-analyst conflicts rule and must hold Series 86/87. A "Head of Research" who manages analysts but does not personally write research is not a research analyst (although the rule covers supervisors of research analysts separately).
- The org-chart designation is independent of title. If a person is shown as a research analyst on the firm's org chart submitted to FINRA, that designation makes them a research analyst regardless of what their business card says.
- Series 86 covers analysis; Series 87 covers regulation. Both are required to act as a research analyst. The firm cannot Series-86-only an analyst and let them publish.
Investment Discretion Under the Exchange Act
A separate but related concept the exam tests is investment discretion under the Securities Exchange Act:
- A person exercises investment discretion with respect to an account if the person:
- Is authorized to determine what securities are bought or sold for the account, or
- Makes those decisions in fact, or
- Otherwise exercises influence the SEC has determined should be subject to the Act
The Exchange Act "influence" concept matters here because the research-analyst conflicts rule restricts trading by research analysts and by persons able to influence the content of research reports, paralleling the same "influence" standard. The exam tests the principle that anyone with substantive influence over what a research report says is treated, for personal-trading purposes, the same way the analyst is.
The investment-discretion concept also reappears in the soft-dollar safe harbor later in this unit: the safe harbor only protects a money manager who exercises investment discretion in this same sense.
Exam Tip: Gotchas
- "Influence" extends the research-analyst conflicts rule's reach beyond just analysts. A research director, a desk strategist who edits an analyst's conclusions, or a senior executive who reviews drafts and pushes for changes can all be "persons able to influence" research content, and are therefore covered by the personal-trading restrictions.
- Investment discretion is the gating fact for the soft-dollar safe harbor. A money manager who lacks investment discretion cannot rely on the soft-dollar safe harbor for any of the manager's brokerage arrangements (covered later in this unit).
- Discretion in fact, not just on paper. The Exchange Act reaches a person who makes investment decisions even without formal authority. Authority on paper is one prong; in-fact decision-making is another.