FINRA RELAXES THIRD PARTY RESEARCH DISTRIBUTION RULE

FINRA recently liberalized its rule concerning the distribution of independent third-party research reports and issued a podcast describing the rule change. As a general rule, firms must disclose any ownership interest in the subject company, the management of a public offering, any market-making activity, or any other material conflicts of interest. The disclosure requirements had not applied to the extent an independent research report was made available upon customer request or through a FINRA member’s website. The new rule allows firms to also avoid the disclosure where it notifies the customer of the availability of an independent research report and the customer requests such report. Even where disclosures are required, a firm can direct the customer to a web address containing the necessary disclosures. To be considered “independent,” the member firm cannot have input into the report. FINRA also relaxed the supervisory review of independent third-party research.

OUR TAKE: The new rules should help expedite getting research information to customers. It also encourages the creation of independent research.

http://www.finra.org/web/groups/rules_regs/documents/notice_to_members/p038273.pdf
http://www.finra.org/RulesRegulation/ComplianceTools/FINRAPodcasts/index.htm