Developments of Note
NASD Proposes Governing Research Analyst Recommendations
The NASD proposed a new rule governing securities recommendations by research analysts (NASD Conduct Rule 2711 – Research Analysts and Research Reports) (the "Rule"). The NASD has become concerned that conflicts of interest can arise for analysts who recommend equity securities in research reports and public appearances if, among other things, an analyst’s compensation is tied to specific investment banking transactions; a research report is subject to the approval of a firm’s investment banking department; an analyst makes personal trades in the stock of the companies that the analyst covers; or an analyst or the firm has a financial interest in the issuing company. Among other things, the Rule would (1) prohibit a member’s investment banking department from supervising or controlling the member’s research department and from reviewing or approving research reports before publication; (2) restrict the
