6.5. The Role of Research Analysts

Many investment banks have their own research departments. The research analysts employed by these departments can be an excellent source of insight into markets, both for their employing firms and for outside consumers of their research reports. A research report is any written (including electronic) communication analyzing a security or issuer, and containing information reasonably sufficient to base an investment decision on. Broader analyses, such as a discussion of the state of an industry, are only research reports if they analyze one or more securities or issuers in a manner reasonably sufficient to use as the basis for an investment decision.

Rules around research analysts and research reports tend to be fairly heavily tested on the exam. These rules have become much more stringent in recent years, as part of an effort to insulate analysts from potential pressure to alter research reports and recommendations. In this brief section, we discuss some general rules, while other rules are discussed where they are most relevant. A table summarizing these rules may be found at the beginning of Chapter 9.

Legal and compliance staff checking for legal and compliance issues are the only non-research personnel who may review and approve/block a research report b