FCA BS: Investment Research

Question 1

Investment Research Definition

Answer 1

Information suggesting an investment strategy or the opinion on value of financial instruments, which:

• is labelled as IR, or presented as an objective, independent explanation of the recommendation
• if the recommendation were to be made by investment firm to client, it would not constitute a personal recommendation

Question 2

Investment Research vs Generic Research vs Marketing Communications

Answer 2

Investment research will contain some degree of substantive analysis

Research in generic material (political climate, market issues etc) is only considered IR when it combines an investment strategy

Non-independent investment research is marketing communication

Question 3

Arrangement for Financial Analysts

Answer 3

• a financial analyst cannot ‘front run’ until the recipients of research have had opportunity to act, unless it is a market maker acting in good faith or an unsolicited client order
• a financial analyst cannot accept inducements for research
• a financial analysts remuneration cannot be linked to transactions or recommendations contained in research.
• a financial analyst cannot be supervised by investment banking or sales and trading personnel
• a financial analyst cannot be used in a marketing capacity

Question 4

Firms disseminating another person’s research, exemptions from requirements

Answer 4

• the person that produces research is not a member of disseminating firm’s group
• the firm does not substantially alter the recommendations
• the firm does not present research as being produced by it
• firm verifies that producer was subject to investment research requirements

Question 5

Identity of Research Producer

Answer 5

• name and job title
• name of firm
• competent authority of firm
• for non-written research recommendations, where the disclosures can be easily accessed such as internet site