NU Online News Service, Dec. 18, 2003, 4:28 p.m. EST – The Bond Market Association, New York, is seeking public comments on a draft of principles it has developed to ensure the independence of fixed-income product research in the United States and Europe.[@@]
Members of the association, which represents companies on both sides of the Atlantic, have spent a year developing the guidelines. The association has posted the draft at http://www.bondmarkets.com/market/research_principles.pdf
The deadline for comments is Feb. 17, 2004. The association hopes to make final recommendations by March 1, 2004.
The association has come up with 10 basic principles:
– Firms should promote the integrity of fixed-income research and the ability of fixed-income research analysts to express their own independent views by establishing prohibitions on promising favorable fixed-income research and on retaliation against research analysts for research that may adversely affect a firm’s investment banking or sales and trading interests, and by ensuring decisions regarding fixed-income research coverage are made by research department personnel.
- Supervisory and management structures should insulate fixed-income research analysts from review, pressure and control by investment banking personnel, including reporting line structures and research analyst performance evaluations, maintaining physical separation where appropriate.
- Firms should take measures to prevent inappropriate influence by non-research department personnel and issuers over the content of fixed-income research reports and the timing of their publication.
- Fixed-income research analysts should be compensated in a manner designed to promote their independence.
- Firms should impose personal trading restrictions on fixed-income research analysts to manage potential conflicts of interest.
- Firms and fixed-income research analysts should inform investors of potential conflicts of interest that may affect fixed-income research.
- Fixed-income research analysts should not act as marketers or solicitors of investment banking services.
- Firms should manage potential conflicts of interest relating to their trading desks and the publication of fixed-income research, including establishing a prohibition on improperly trading securities and related derivative securities ahead of fixed-income research reports, and disclosing of potential conflicts of interest relating to the trading desk.
- Trader commentary, trading ideas and other analyses produced by trading desk personnel must be clearly identified as such, and as separate and distinct from research produced by the fixed-income research department.
- Firms should allocate sufficient supervisory resources to promote the integrity of the fixed-income research process, including establishing written policies and procedures and providing periodic training to research analysts, research managers and investment banking personnel.