Quick Answer
The FINRA research-analyst rule governs the relationship between equity research analysts and investment banking to prevent analyst recommendations from being influenced by banking business. Firms must maintain an information barrier between the two functions, prohibit certain communications (no research participation in pitches or road shows), enforce quiet periods (10 calendar days after an initial public offering (IPO), 3 days after a secondary offering for managers and co-managers), and require specific disclosures in research reports about banking relationships and conflicts.
The research-analyst conduct rule is the single most consequential compliance regime governing how investment banking and the research department coexist inside the same firm. Every other internal-communications rule layers on top of this one.
Information Barrier Between Banking and Research
Firms must establish, maintain, and enforce written policies and procedures reasonably designed to identify and effectively manage conflicts of interest between investment banking and research.
- Prohibited: Investment banking personnel cannot supervise or control research analysts
- Prohibited: Research analyst compensation may NOT be based on specific investment banking transactions or contributions to banking revenue
- Permissible compensation factors: Overall firm revenue, productivity of the analyst, and quality of research output
The information barrier separates the private side (investment banking) from the public side (research, sales, trading, asset management). Bankers and analysts can work at the same firm, but reporting lines, compensation, and substantive collaboration on research output are walled off.
Exam Tip: Gotchas
- Research analyst compensation may NOT be tied to specific investment banking transactions. Pegging an analyst's bonus to whether the firm wins a healthcare initial public offering (IPO) mandate is a direct rule violation.
- Bankers cannot supervise analysts and analysts cannot report up to banking. The reporting line is structural, not a matter of day-to-day judgment.
Prohibited Communications
The rule lists specific banker-to-analyst and analyst-to-banker activities that are flatly off-limits.
- Investment banking may not direct research analysts to engage in sales or marketing efforts for an investment banking transaction
- Investment banking may not direct research analysts to participate in any communication with a current or prospective customer about an investment banking services transaction
- Research analysts may not participate in pitches and other solicitations of investment banking business
- Research analysts may not participate in road shows for an investment banking transaction
Think of it this way: the research analyst is supposed to be the firm's independent voice to investors. If the analyst joins the pitch team to win mandates, the independence is gone before the deal is even announced. If the analyst rides the road show, the analyst is now a salesperson, not a researcher. The rule draws the line at "no participation in the deal-winning or deal-marketing chain."
Exam Tip: Gotchas
- Research analyst road-show participation is prohibited. This is a frequent exam fact. Bankers run the road show; analysts do not present.
- Research analyst pitch participation is prohibited. The pitchbook can cite published research, but the analyst cannot be in the room to win the mandate.
Quiet Periods
Research reports and public appearances by an analyst about an issuer are restricted for a defined period around an offering. The quiet period is the window when the firm's research voice goes silent on the issuer.
| Offering Type | Restriction | Length | Who It Binds |
|---|---|---|---|
| Initial Public Offering (IPO) | No research report; no public appearance about the issuer | 10 calendar days after the offering date | Manager or co-manager of the IPO |
| Secondary Offering | No research report; no public appearance about the issuer | 3 calendar days after the offering date | Manager or co-manager of the offering (non-manager syndicate members have no quiet period) |
Booster shots and pre-arranged favorable coverage scheduled to publish immediately after the quiet period ends are also prohibited. The rule prevents firms from timing a favorable initiation or upgrade to coincide with the end of the silent window.
Exam Tip: Gotchas
- The IPO quiet period is 10 calendar days; the secondary offering quiet period is 3 calendar days. Memorize 10 / 3.
- Quiet periods bind managers and co-managers, not the full syndicate. A non-manager syndicate member can publish research on the issuer immediately after pricing.
- Booster shots are prohibited. A favorable report queued up to drop the day after the quiet period ends violates the rule even if the report itself is timed perfectly.
Required Disclosures in Research Reports
Every research report must disclose specific information that lets the reader weigh conflicts before relying on the analysis.
- Conflicts of interest, including the analyst's or firm's ownership and any material conflicts
- Rating system definitions and the distribution of ratings across the firm's research universe (how many buys, holds, sells)
- Compensation received or to be received from the subject company for investment banking services
- Whether the firm acted as manager or co-manager of a public offering of the subject company's securities within the past 12 months
The 12-month look-back on manager / co-manager status is the most frequently tested disclosure. A research report on a company whose IPO the firm co-managed 9 months ago must disclose that fact; at 13 months out, the disclosure is no longer required.
Exam Tip: Gotchas
- The manager / co-manager disclosure has a 12-month look-back. Inside 12 months: disclosed. Outside 12 months: not required.
- Distribution-of-ratings disclosure is firm-wide, not industry-specific. The disclosure shows the firm's overall mix of buys, holds, and sells across coverage, so the reader can calibrate whether "buy" actually means buy at this firm.
- The rule doesn't prohibit ALL communication between banking and research. The line is influence over the recommendation, not no contact. Bankers can receive published research the same way any client does; they cannot pressure the substance of upcoming reports.