The Securities and Exchange Commission has approved new FINRA rules which for the first time establish guidelines, requirements and prohibitions applicable to debt research analysts.

Introduction

The Securities and Exchange Commission has approved new FINRA rules which for the first time establish guidelines, requirements and prohibitions applicable to debt research analysts. The new rules, which are largely similar to the rules which govern equity research analysts, cover familiar topics including research analyst conflicts of interest, prepublication review of research reports, supervision and compensation of debt research analysts, retaliation against analysts, limitations on trading by debt research analysts, solicitation and marketing of investment banking activities, the content and disclosure contained in debt research reports and public appearances by debt research analysts, and the distribution of debt research reports.

However, unlike the rules applicable to equity research analysts, the debt analyst rules (i) exempt the distribution of debt research reports to qualified institutional buyers and other institutional accounts from many of the prescriptive requirements otherwise applicable to research reports distributed to retail investors, (ii) delineate prohibited and permissible communications between debt research analysts and principal trading and sales and trading personnel, and (ii) do not impose any quiet periods on the issuance of debt research reports following securities offerings. The rules also do not impose quiet periods before or after the termination, expiration or release of lockup arrangements. 

The debt research analyst rules were proposed by FINRA in November 2014 and approved by the SEC in July 2015 following receipt and review of public comments. FINRA intends to announce the effective date of the rules in a Regulatory Notice no later than mid-September 2015 and has stated that the effective date should be no later than 180 days after publication of the Regulatory Notice announcing SEC approval.1

Rules governing conflicts of interest

The new FINRA debt research analyst rules contain an overarching provision that requires broker-dealers to establish, maintain and enforce written policies and procedures reasonably designed to identify and effectively manage conflicts of interest related to (i) the preparation, content and distribution of debt research reports, (ii) public appearances by debt research analysts and (iii) the interaction between debt research analysts and those outside the research department, including investment banking, sales and trading and principal trading personnel of the broker- dealer, issuers whose debt securities are the subject of a research report, and customers. The written policies and procedures must be reasonably designed to promote objective and reliable debt research that reflects the truly held opinions of debt research analysts and to prevent the use of debt research reports or debt research analysts to manipulate or condition the market or favor the interests of the firm or a current or prospective customer or class of customers. The equity research rules contain the same provisions but do not specifically refer to interaction with principal trading personnel.

FINRA’s proposing release noted that although the rules do not mandate physical separation between debt research and the investment banking, sales and trading and principal trading departments, “FINRA would expect such physical separation except in extraordinary circumstances where the costs are unreasonable due to a firm’s size and resource limitations. In those instances, a firm must implement written policies and procedures, including information barriers, to effectively achieve and monitor separation between debt research and investment banking, sales and trading and principal trading personnel.” 

Prepublication review

Broker-dealers must prohibit the prepublication review, clearance or approval of debt research reports by investment banking personnel, principal trading personnel and sales and trading personnel (the equity research analyst rules only extend such prohibition to investment banking personnel). In addition, as with equity research, broker-dealers must restrict or prohibit prepublication review, clearance or approval of debt research reports by other persons not directly responsible for the preparation, content and distribution of such reports, other than legal and compliance personnel. Further, as with equity research, broker-dealers must prohibit prepublication review of a debt research report by the subject company2 for purposes other than the verification of facts.

With respect to factual review, sections of a draft debt research report may be provided to non-investment banking personnel, non-principal trading personnel, non-sales and trading personnel or to the subject company for factual review, if (i) the sections of the draft submitted do not contain the summary, recommendation or rating, (ii) a complete draft of the report is first provided to legal or compliance personnel and (iii) where any change to the proposed rating or recommendation is contemplated after the third party review, the analyst must first provide written justification to, and receive written authorization from, legal or compliance personnel for the change. These procedures are consistent with procedures for equity research as well (the equity research analyst rules cover providing the draft to non-investment banking personnel or to the subject company for factual review).

Coverage decisions

Broker-dealers must restrict or limit input by investment banking, sales and trading and principal trading personnel into debt research coverage decisions (the equity research analyst rules only extend this restriction to investment banking personnel). However, as noted in FINRA’s proposing release, “the provision does not preclude personnel from these or any other department from conveying customer interests and coverage needs, so long as final decisions regarding the coverage plan are made by research management.” As with equity research, management of the research department must independently make all final decisions regarding the debt research coverage plan.

Supervision of debt research analysts

Debt research analysts may not be supervised by persons engaged in investment banking services transactions, principal trading activities or sales and trading (the equity research analyst rules only extend this prohibition to investment banking personnel). 

In addition, broker-dealers must establish information barriers or other institutional safeguards to ensure that debt research analysts are not subject to “review, pressure or oversight” by personnel engaged in investment banking services, principal trading or sales and trading activities, or other persons who may be “biased” in their judgment or supervision (the equity analyst rules do not specifically apply this prohibition to principal trading personnel).

Retaliation against debt research analysts

As with equity research, a broker-dealer must prohibit its employees from directly or indirectly retaliating or threatening to retaliate against debt research analysts due to an adverse, negative or otherwise unfavorable debt research report or public appearance that may adversely affect the broker-dealer’s present or prospective business interests. FINRA’s proposing release notes that this provision “is not intended to limit a member’s authority to discipline or terminate a research analyst, in accordance with the member’s written policies and procedures, for any cause other than writing an adverse, negative, or otherwise unfavorable research report or for making similar comments during a public appearance.”

Research department budget

Determination of the debt research department’s budget must be limited to senior management of the broker-dealer, excluding senior management engaged in investment banking services or principal trading activities (the equity analyst rules do not similarly exclude principal trading personnel). Decisions regarding the budget for the debt research department may not take into consideration specific revenues or results from investment banking activities, but may take into consideration the revenues and results of the broker-dealer as a whole, and in any event all personnel may provide senior management with input regarding the demand for and quality of debt research, including product trends and customer interests (the equity analyst rules do not contain this sentence).

Compensation of research analysts

Broker-dealers may not compensate debt research analysts based on specific investment banking services or specific trading transactions or based on contributions to such activities (the equity analyst rules limit this prohibition to specific investment banking services), and investment banking and principal trading personnel cannot have input into the compensation of debt research analysts.

As with equity research, compensation of a debt research analyst who is primarily responsible for the substance of a research report must be reviewed and approved at least annually by a committee that reports to the firm’s board of directors, or a senior executive officer if the firm has no board of directors. The committee must not include personnel involved in investment banking or principal trading (the equity analyst rules do not prohibit principal trading personnel from serving on the comparable committee). 

In reviewing compensation of a debt research analyst, the committee must consider if applicable (i) the debt research analyst’s individual performance as well as (ii) the overall ratings received from customers and peers, independent of the investment banking department and persons engaged in principal trading activities, and other independent ratings services (the equity analyst rules do not similarly exclude ratings from persons engaged in principal trading activities and also require consideration of the correlation between the equity research analyst’s recommendations and the performance of the recommended securities). Whereas investment banking and principal trading personnel cannot have input into the compensation of debt research analysts, the debt analyst rules provide that sales and trading personnel may convey “customer feedback” in connection with debt research analyst compensation decisions, but final compensation determinations for debt research analysts must be made by management of the research department, subject to review and approval by the committee discussed above. 

Limitations on trading by debt research analysts

Broker-dealers must restrict or limit trading by a debt research analyst account3  in securities, any derivatives of such securities, and any fund whose performance is materially dependent upon the performance of securities covered by such debt research analyst. Broker-dealers must ensure that debt research analyst accounts, supervisors of debt research analysts and associated persons with the ability to influence the content of debt research analyst reports do not benefit in their trading from knowledge of the content or timing of a research report before the intended recipients of such report have had a reasonable opportunity to act based on the content of such report.4

Debt research analyst accounts may not purchase or sell securities or any option on or derivatives of such securities in a manner inconsistent with the most recent recommendation provided by such debt research analyst, other than in circumstances of a financial hardship (e.g., an unanticipated significant change in the personal financial circumstances of the beneficial owner of the research analyst account).5 

The equity research rules contain the identical limitations, but also prohibit a research analyst account from purchasing or receiving any security before an issuer’s IPO if the issuer is principally engaged in the same types of business as companies the analyst follows.

Promises of favorable research

As with equity research, broker-dealers may not make explicit or implicit promises of favorable debt research or a particular debt research rating or recommendation or specific debt research content in exchange for the receipt of business or compensation.

Solicitation and marketing of investment banking activities of debt research analysts

Broker-dealers must restrict or limit activities by debt research analysts that can reasonably be expected to compromise their objectivity, and must prohibit participation in pitches and other solicitations of investment banking services and participation in investment banking roadshows and other marketing on behalf of an issuer related to an investment banking services transaction.

As with equity research, FINRA interprets this provision to prohibit in pitch materials any information about debt research capacity in a manner that suggests, directly or indirectly, that the broker-dealer might provide favorable debt research coverage. For example, FINRA objects to including an analyst’s industry ranking in a pitch book or related materials, but would accept including the fact of coverage and the name of the debt research analyst.

Notwithstanding the foregoing, FINRA’s proposing release notes that “consistent with existing guidance on the equity research rules, debt research analysts may listen to or view a live webcast of a transaction-related road show or other widely attended presentation by investment banking to investors or the sales force from a remote location, or another room if they are in the same location.

In addition, investment banking department personnel may not direct debt research analysts to engage in sales or marketing efforts related to an investment banking services transaction, or direct debt research analysts to communicate with current or prospective customers with respect to investment banking services transactions. FINRA interprets this to mean that debt research analysts cannot engage in any communications with a current or prospective customer in the presence of investment banking department personnel or company management about an investment banking services transaction. Moreover, any written or oral communications by a research analyst with a current or prospective customer or internal personnel related to an investment banking services transaction must be fair, balanced and not misleading. Equity research analysts are subject to the same limitations.

Joint due diligence

FINRA’s view for both debt and equity research is that research analysts may not perform due diligence in the presence of investment banking department personnel prior to the selection of underwriters by an issuer in connection with an investment banking services transaction. According to FINRA’s proposing release, “[o]nce the mandate has been awarded, FINRA believes joint due diligence may take place in accordance with appropriate written policies and procedures to guard against interactions to further the interests of the investment banking department. At that time, FINRA believes that the efficiencies of joint due diligence outweigh the risk of pressure on debt research analysts by investment banking.”

Communications between research analysts and trading desk personnel

The debt research rules contain provisions governing relations between debt research analysts and trading desk personnel that do not apply to equity analysts. Broker-dealers are required to establish, maintain and enforce written policies reasonably designed to prohibit (i) sales and trading and principal trading personnel attempting to influence a debt research analyst’s opinion or views for the purpose of benefiting the trading position of the firm, a customer or a class of customers and (ii) debt research analysts identifying or recommending specific potential trading transactions to sales and trading or principal trading personnel that are inconsistent with such analyst’s currently published debt research reports, or disclosing the timing of, or material investment conclusions in, a pending debt research report.

Notwithstanding these prohibitions, subject to various conditions, 

  1. sales and trading and principal trading personnel may communicate customers’ interests to a debt research analyst, so long as the analyst does not then publish debt research for the purpose of benefiting the trading position of the firm, a customer or a class of customers, 
  2. a debt research analyst may provide customized analysis, recommendations or trade ideas to sales and trading and principal trading personnel and customers, so long as they are not inconsistent with the analyst’s currently published or pending debt research, and any subsequently published debt research is not for the purpose of benefiting the trading position of the firm, a customer or a class of customers, 
  3. sales and trading and principal trading personnel may seek the views of debt research analysts regarding the creditworthiness of the issuer of a debt security, 
  4. a debt research analyst may seek information from sales and trading and principal trading personnel regarding a particular bond instrument, current prices, spreads, liquidity and similar market information relevant to the analyst’s valuation of a particular debt security, and
  5. communications that are not related to sales and trading, principal trading or debt research activities may take place without restriction, unless otherwise prohibited.

To the extent there is ambiguity whether a particular job function falls with principal trading or sales and trading, the SEC adopting release notes FINRA’s assurance that it will consider providing guidance where it is unclear whether a particular job function or activity falls within “sales and trading” or “principal trading” activities.

Quiet periods

The equity research rules contain certain quiet periods during which equity research may not be published – a minimum of 10 days following an IPO where the broker-dealer participated as an underwriter or dealer and a minimum of three days following a secondary offering if the broker-dealer acted as a manager or co-manager of the offering, subject to exceptions for emerging growth companies and actively-traded securities. The debt research rules do not contain any quiet periods. In addition, none of the rules contain quiet periods before or after the termination, expiration or waiver of a lockup agreement with a subject company or its shareholders.

Rules governing the content of and disclosure in debt research reports and appearances by debt research analysts

Written procedures

Broker-dealers must establish, maintain and enforce written policies and procedures reasonably designed to ensure that purported facts included in research reports are based on reliable information, that any recommendation or rating made has a reasonable basis and that investment recommendations are accompanied by a clear explanation of any valuation method employed and the risks associated with the investment. The equity research rules include a similar standard.

Ratings

While ratings are not mandated by the rules, if a broker-dealer includes a rating system in a debt research report, the terms of the rating system used must be set forth within the report, including the time horizon and any benchmarks on which a rating is based. In each debt research report for which the broker-dealer includes a rating (irrespective of the rating system used), the report must include the percentage of all subject companies rated by the firm to which the firm would assign a “buy,” “hold” or “sell” rating. The broker-dealer must also disclose in each debt research report the percentage of subject companies it provides a rating for, in each of the “buy,” “hold” and “sell” categories, for which it has provided investment banking services in the preceding 12 months. If a broker-dealer assigns a rating with respect to a subject company, and the firm has assigned a rating for such subject company for at least one year, the report must include information as to the date and the rating assigned for the shorter of the period in which a rating has been assigned to the subject company, or three years. The equity research rules include similar requirements (equity reports also must include a line graph showing the security’s daily closing prices).

Disclosures of conflicts of interest in research reports

The conflict disclosure requirements for debt analysts are similar to the requirements for equity analysts. Broker-dealers are required to disclose in debt research reports

  1. if the debt research analyst (or a member of his or her household) has a financial interest in the debt or equity securities of the subject company, and the nature of such interest, 
  2. if the debt research analyst has received compensation based upon, among other factors, the broker-dealer’s investment banking, principal trading or sales and trading activities,
  3. if the broker-dealer or any of its affiliates has managed or co-managed a public offering of securities for the subject company in the preceding 12 months, received compensation for investment banking services from the subject company in the preceding 12 months, or expects to receive or seek compensation for investment banking services from the subject company in the next three months,6
  4. compensation provided by the subject company to the broker-dealer or its affiliates for products or services other than investment banking in the past 12 months,7
  5. if the subject company is or over the prior 12 months has been a client of the broker-dealer and if so the types of services provided, 
  6. whether the broker-dealer trades or may trade as principal in the debt securities or in related derivatives that are the subject of the research report (this is analogous to the equity research rule requirement to disclose market making activity),
  7. if the debt research analyst has received compensation from the subject company in the preceding 12 months, and 
  8. any other material conflict of interest of the debt research analyst or broker-dealer that the research analyst -- or an associated person of the broker-dealer with the ability to influence the content of a research report (such as a supervisor or the head of research) -- knows or has reason to know.8

The rule also includes an exception to permit a debt research analyst or broker-dealer to omit disclosure that would reveal material non-public information regarding specific potential future investment banking transactions. 

The equity research rules include substantially the same requirements, but also require disclosure (i) if the broker-dealer or its affiliates beneficially own 1% or more of any class of common equity securities of the subject company and (ii) if the broker-dealer was making a market in the securities of the subject company at the time of publication or distribution of the research report.

Disclosure in public appearances

The requirements for disclosure in public appearances closely tracks the requirement for equity analysts. A debt research analyst must disclose at the time of a public appearance 

  1. if the analyst or a member of the analyst’s household has a financial interest in the debt or equity securities of the subject company and the nature of such interest, 
  2. whether the broker-dealer or any affiliate has received compensation from the subject company during the preceding 12 months, 
  3. if the analyst received compensation from the subject company during the last 12 months, 
  4. whether the subject company is currently or was during the preceding 12 months a client of the broker-dealer and, if so, the types of services provided, or 
  5. any other material conflict of interest of the analyst or the broker-dealer that the analyst knows or has reason to know of at the time of the public appearance (the catchall does not extend to associated persons of the broker-dealer beyond the debt research analyst). 

The rule also includes an exception to permit a debt research analyst to omit disclosure that would reveal material non-public information regarding specific potential future investment banking transactions.

The equity research rules contain substantially the same requirements, but also require disclosure if the broker-dealer or its affiliates beneficially own 1% or more of any class of common equity securities of the subject company.

Distribution of a broker-dealer’s own debt research reports

As with equity research, broker-dealers must establish, maintain and enforce written policies reasonably designed to ensure that a debt research report is not distributed selectively to trading personnel or a particular customer or class of customers in advance of other customers that the firm has previously determined are entitled to receive the debt research report.

However, the amendments clarify that firms may provide different research products and services to different classes of customers, provided the products are not differentiated based on the timing of receipt of potentially market moving information and the firm discloses its research dissemination practices to all customers that receive a research product. For example:

A member may offer one debt research product for those with a long-term investment horizon (“investor research”) and a different debt research product for those customers with a short-term investment horizon (“trading research”). These products may lead to different recommendations or ratings, provided that each is consistent with the meaning of the member’s ratings system for each respective product. However, a member may not differentiate a debt research product based on the timing of receipt of a recommendation, rating or other potentially market moving information, nor may a member label a debt research product with substantially the same content as a different debt research product as a means to allow certain customers to trade in advance of other customers. In addition, a member that provides different debt research products and services for different customers must inform its other customers that receive a research product that its alternative debt research products and services may reach different conclusions or recommendations that could impact the price of the debt security. Thus, for example, a member that offers trading research must inform its investment research customers that its trading research product may contain different recommendations or ratings that could result in short-term price movements contrary to the recommendation in its investment research.

FINRA’s proposing release further notes that “[a] member that distributes both institutional and retail debt research would be required to inform its retail customers of the existence of the institutional debt research product and, if applicable, that the product may contain different recommendations or ratings than its retail debt research product. This disclosure need not be in each retail debt research report; rather, a member may establish policies and procedures reasonably designed to inform retail investors of the existence and nature of the institutional debt research product.”

Distribution of third party debt research reports

Broker-dealers may not distribute third-party debt research if they know or have reason to know that such research is not objective or reliable. Broker-dealers must establish, maintain and enforce written policies and procedures reasonably designed to ensure that third-party debt research reports distributed do not contain untrue statements of material fact and are not otherwise false or misleading. Broker-dealers are responsible for identifying untrue statements of material fact or false or misleading information that is either identifiable from reading the report, or that the firm should be aware of based on information otherwise available to the firm. However, a broker-dealer is not required to review a third-party debt research report for compliance with this provision if such report is an independent third-party debt research report. Broker-dealers must communicate to recipients of a third-party debt research report any material conflict of interest of the firm that could reasonably be expected to have influenced the choice of a third-party debt research report provider or the subject company of a third-party debt research report. Third-party debt research reports must also be clearly labeled in order to avoid confusion by the recipient as to the preparer of the report. The equity research rules contain substantially the same requirements.

The debt research rules do not require a registered principal or supervisory analyst to review for compliance and approve by signature or initial all third-party research reports distributed by the broker-dealer, as is otherwise required for third-party equity research.

Rule governing the termination of coverage

The equity research rules require a broker-dealer to promptly notify its customers if it intends to terminate coverage of a company. The debt research rules do not contain any similar requirement.

Exemption for debt research reports provided to institutional investors

Most of the provisions regarding supervision, coverage determinations, budget and compensation determinations and all of the disclosure requirements do not apply to the distribution of debt research reports by broker-dealers to qualified institutional buyers9 or institutional accounts.10 In particular, provisions that will not apply to institutional debt research include the restriction on prepublication review by principal trading and sales and trading personnel, the restrictions on input by investment banking, principal trading and sales and trading into coverage decisions, limits on supervision of debt research analysts, limits on the determination of the research department budget, restrictions on the determination of debt research analyst compensation, restrictions on analyst account trading, and information barriers to insulate analysts from review or oversight by investment banking, sales and trading or principal trading personnel. The provisions for institutional research are unique to debt research and do not apply to equity research.

Notwithstanding the exemption, some provisions will continue to apply to institutional debt research. The broker-dealer must still establish written procedures designed to address conflicts that relate to the prohibition on prepublication review by investment banking personnel, the establishment of information barriers to insulate debt research analysts from pressure by investment banking, principal trading and sales and trading personnel, the prohibition on retaliation against debt research personnel, the prohibition on promises of favorable research coverage, the prohibition against participation by debt research analysts in pitches and road shows related to investment banking transactions, the prohibition on directing research analysts to participate in sales and marketing related to investment banking transactions, the prohibition on a subject company reviewing reports prior to distribution (for purposes other than verification of facts), and the prohibition on communicating with customers in the presence of investment banking personnel or company management about an investment banking transaction. 

Also, while none of the disclosure requirements apply to institutional debt research, such research must still disclose (i) that the report is intended only for institutional investors and is not subject to all of the independence and disclosure standards of retail debt research, (ii) that the views in the report may differ from the views in retail debt research reports (if applicable), and (iii) that the report may not be independent of the firm’s proprietary interests and that the firm trades the securities covered in the report for its own account and on a discretionary basis for certain customers and that such trading interests may be contrary to the recommendation in the report (if applicable).

In order to rely on this exemption with respect to the distribution of debt research reports to qualified institutional buyers, the broker dealer must have a reasonable basis to believe that the qualified institutional buyer is capable of evaluating investment risks independently, both in general and with respect to particular transactions and investment strategies involving debt securities, and such qualified institutional buyer must affirmatively indicate that it is exercising independent judgment in evaluating the recommendations provided. The broker dealer must provide written disclosure to the qualified institutional buyer that the firm may provide debt research reports that are intended only for institutional investors. If the qualified institutional buyer does not contact the broker-dealer and request to receive only retail debt research reports, the firm can reasonably conclude that the qualified institutional buyer has consented to receiving institutional debt research reports.

In order to rely on this exemption with respect to the distribution of debt research reports to institutional accounts, the institutional account must affirmatively notify the broker-dealer in writing that it wishes to receive institutional debt research and forgo treatment as a retail investor.

In order to avoid a disruption in the distribution of institutional debt research, broker-dealers may distribute institutional debt research to institutional accounts, other than natural persons, for up to one year after the date of SEC approval of the rules, without obtaining affirmative or negative consent. After this one-year transition period, the broker-dealer must obtain the necessary consent to distribute the institutional debt research to a person. Natural persons that qualify as an institutional account must provide affirmative written consent to receive institutional debt research during the year transition period and thereafter.

Exemptions for broker-dealers with limited investment banking activity or limited principal trading activity

Certain of the conflict of interest rules relating to prepublication review, input into coverage decisions, supervision, review and compensation of debt research analysts, information barriers, and the research department budget do not apply to broker-dealers that over the previous three years, on average per year, participated in 10 or fewer investment banking services transactions as a manager or co-manager and generated $5m or less in gross investment banking revenues from those transactions. The firm would still need to establish information barriers or other institutional safeguards to ensure debt research analysts are insulated from pressure by persons engaged in investment banking services or other persons who might be biased in judgment or supervision. The equity research rules contain a similar exemption.

Unlike the equity research rules, the debt trading rules contain a new exemption from many of the conflict of interest rules for broker-dealers whose trading gains or losses on principal trades in debt securities are $15m or less over the previous three years, on average per year, and who employ fewer than 10 debt traders. In order to benefit from this exemption, the broker-dealer must establish information barriers or other institutional safeguards to ensure that debt research analysts are insulated from pressure by persons engaged in principal trading or sales and trading activities or other persons who might be biased in their judgment or supervision.

Key definitions

The new rules generally apply to “debt research reports” published by a “debt research analyst” with respect to a “debt security” or an issuer of a debt security.

A “debt research report” means any written (including electronic) communication that includes an analysis of a debt security or an issuer of a debt security and that provides information reasonably sufficient upon which to base an investment decision, other than a communication that solely constitutes an equity research report. In general the term excludes:

(A) communications that are limited to the following, if they do not include an analysis of, or recommend or rate, individual debt securities or issuers: (i) discussions of broad-based indices, (ii) commentaries on economic, political or market conditions, (iii) commentaries on or analyses of particular types of debt securities or characteristics of debt securities, (iv) technical analyses concerning the demand and supply for a sector, index or industry based on trading volume and price, (v) recommendations regarding increasing or decreasing holdings in particular industries or sectors or types of debt securities, or (vi) notices of ratings or price target changes, provided that the broker-dealer simultaneously directs the readers of the notice to the most recent debt research report on the subject company that includes all current applicable required disclosures and that such debt research report does not contain materially misleading disclosure;

(B) the following communications, even if they include an analysis of an individual debt security or issuer and information reasonably sufficient upon which to base an investment decision: (i) statistical summaries of multiple companies’ financial data, including listings of current ratings that do not include an analysis of individual companies’ data, (ii) an analysis prepared for a specific person or a limited group of fewer than 15 persons, (iii) periodic reports or other communications prepared for investment company shareholders or discretionary investment account clients that discuss individual debt securities in the context of a fund’s or account’s past performance or the basis for previously made discretionary investment decisions, or (iv) internal communications that are not given to current or prospective customers,

(C) communications that constitute statutory prospectuses that are filed as part of the registration statement; and

(D) communications that constitute private placement memoranda and comparable offering-related documents prepared in connection with investment banking services transactions, other than those that purport to be research.

A “debt research analyst” is an associated person who is primarily responsible for, and any associated person who reports directly or indirectly to a debt research analyst in connection with, the preparation of the substance of a debt research report, whether or not they have the job title of “research analyst.” This is consistent with the equivalent term for equity research analyst.

A “debt security” means any security as defined in Section 3(a)(10) of the Securities Exchange Act, other than any equity security as defined in Section 3(a)(11) of the Securities Exchange Act (which includes any security convertible, with or without consideration, into an equity security, or carrying any warrant or right to subscribe to or purchase an equity security), any municipal security, any security-based swap or any US Treasury security. The definition does not carve out agency securities or foreign sovereign debt securities.