The New York Stock Exchange proposes to amend certain provisions of NYSE Rules 344 and 472 governing research analyst conflict of interests. These amendments would: (i) eliminate the exception for pre-publication factual verification review of research reports by non-research personnel, (ii) change the quiet periods surrounding securities offerings and the release of lock-up agreements, (iii) allow member organizations to develop policies and procedures if they choose to prohibit research analysts from holding securities for companies they cover, (iv) alter the format for certain disclosures in research reports, and (v) extend the anti-retaliation prohibitions to all employees of a member organization, not just investment banking personnel.
The National Association of Securities Dealers is proposing to amend NASD Rules 1050 and 2711 to implement certain changes intended to improve the effectiveness of the research analyst conflict of interest rules and registration requirements by making certain changes to the existing provisions regarding, among other things: (i) disclosure of conflicts, (ii) quiet periods, (iii) restrictions on review of research reports by non-research personnel, and (iv) restrictions on personal trading by research analysts.
The proposed rule changes are drawn from a joint comprehensive report on the operation and effectiveness of the above-referenced rules prepared by NYSE and NASD (together, the SROs) at the request of the Securities and Exchange Commission in 2005. The SROs concluded that certain changes to their rules would further improve their effectiveness “by striking an even better balance between ensuring objective and reliable research on the one hand and permitting the flow of information to investors and minimizing costs and burdens to members on the other.”