Investment research

Question 1

What constitutes investment research?

Answer 1

o Research or other information recommending or suggesting an investment strategy that:
 Is labelled as investment research
 Is not a personal recommendation

Question 2

In terms of investment research what should a firm have arrangements to ensure?

Answer 2

 No dealing ahead of the research being released to the investing public – need to allow a reasonable time period to elapse (‘front running’)
 Analysts’ remuneration is not linked to specific transactions
 Analysts are not used in a marketing capacity (or supervised by sales & trading staff)

Question 3

What are exceptions to ‘front running’?

Answer 3

• Market maker required to make two-way prices during mandatory quote period irrespective of any information out there.
• Unsolicited orders – not giving advice to the client just them asking

Question 4

What are the research disclosure requirements?

Answer 4

• Name and job title of the analyst
• Name of the firm
• Identity of the competent authority (regulator) or the firm
• Research procedures

Question 5

Under the research disclosure requirements what must firms ensure in terms of research procedures?

Answer 5

o Facts in research are clearly distinguished from interpretations, estimated and opinions
o Sources are reliable
o Projections and forecasts are clearly labelled and assumptions given
o (The above can be substantiated upon request by the FCA)