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FINRA Manual
Corporate Organization
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1050. Registration of Research Analysts
(a)
All persons associated with a member who are to function as research analysts shall be registered with NASD. Before registration as a Research Analyst can become effective, an applicant shall:
(2)
pass a Qualification Examination for Research Analysts as specified by the Board of Governors.
(b)
For the purposes of this Rule 1050, "research analyst" shall mean an associated person who is primarily responsible for the preparation of the substance of a research report or whose name appears on a research report.
(c)
Upon written request pursuant to the Rule 9600 Series, NASD will grant a waiver from the analytical portion of the Research Analyst Qualification Examination (Series 86) upon verification that the applicant has passed:
(1) Levels I and II of the Chartered Financial Analyst ("CFA") Examination; or
(2) if the applicant functions as a research analyst who prepares only
technical research reports as defined in paragraph (e), Levels I and II of the Chartered Market Technician ("CMT") Examination; and
(3) has either functioned as a research analyst continuously since having passed the Level II CFA or CMT examination or applied for registration as a research analyst within two years of having passed the Level II CFA or CMT examination.
(d) An applicant who has been granted an exemption pursuant to
paragraph (c) still must become registered as a General Securities Representative and then complete the regulatory portion of the Research Analyst Qualification Examination (Series 87) before that applicant can be registered as a Research Analyst.
(e) For the purposes of paragraph (c)(2), a "technical research report" shall mean
a research report, as that term is defined in Rule 2711(a)(8), that is based solely on stock
price movement and trading volume and not on the subject company’s financial information, business prospects, contact with subject company’s management, or the valuation of a subject company’s securities.
(f) The requirements of paragraph (a) shall not apply to an associated person who:
(1) is an employee of a non-member foreign affiliate of a member ("foreign research analyst"),
(2) resides outside the United States, and
(3) contributes, partially or entirely, to the preparation of globally-branded or foreign affiliate research reports but does not contribute to the preparation of a member’s research, including a mixed-team report, that is not globally-branded.
Provided that the following conditions are satisfied:
(A) A member that publishes or otherwise distributes globally-branded research reports partially or entirely prepared by a foreign research analyst must subject such research to pre-use review and approval by a registered principal in accordance with NASD Rule 1022(a)(5) or a supervisory analyst pursuant to NYSE Rule 344.11. In addition, the member must ensure that such research reports comply with NASD Rule 2711, as applicable.
(B) In publishing or otherwise distributing globally-branded research reports partially or entirely prepared by a foreign research analyst, a member must prominently disclose:
(i) each affiliate contributing to the research report;
(ii) the names of the foreign research analysts employed by each contributing affiliate;
(iii) that such research analysts are not registered/qualified as research analysts with the NYSE and/or NASD; and
(iv) that such research analysts may not be associated persons of the member and therefore may not be subject to Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
(C) The disclosures required by paragraph (f)(3)(B) of this Rule must be presented on the front page of the research report or the front page must refer to the page on which the disclosures can be found. In electronic research reports, a member may hyperlink to the disclosures. References and disclosures must be clear, comprehensive and prominent.
(D) Members must establish and maintain records that identify those individuals who have availed themselves of this exemption, the basis for such exemption, and evidence of compliance with the conditions of the exemption. Failure to establish and maintain such records shall create an inference of a violation of Rule 1050. Members must also establish and maintain records that evidence compliance with the applicable content, disclosure and supervision provisions of Rule 2711. Members must maintain these records in accordance with the supervisory requirements of Rule 3010, and in addition to such requirement, the failure to establish and maintain such records shall create an inference of a violation of the applicable content, disclosure and supervision provisions of Rule 2711.
(E) Nothing in paragraph (f) of this Rule shall affect the obligation of any person or broker-dealer, including a foreign broker-dealer, to comply with the applicable provisions of the federal securities laws, rules and regulations and any self-regulatory organization rules.
(F) The fact that a foreign research analyst avails himself of the exemption in paragraph (f) shall not be probative of whether that individual is an associated person of the member for other purposes, including whether the foreign research analyst is subject to the Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
(G) A member that distributes non-member foreign affiliate research reports that are clearly and prominently labeled as such must comply with the third-party research report requirements in Rule 2711(h)(13).
(H) For the purposes of the exemption in paragraph (f), the terms "affiliate," "globally-branded research report" and "mixed-team research report" shall have the following meanings:
(i) "Affiliate" shall mean a person that directly or indirectly controls, is controlled by, or is under common control with, a member.
(ii) "Globally-branded research report" refers to the use of a single marketing identity that encompasses the member and one or more of its affiliates.
(iii) "Mixed-team research report" refers to any member research report that is not globally-branded and includes a contribution by a research analyst who is not an associated person of the member.
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Amended by SR-FINRA-2007-010 eff. April 7, 2008. Amended by SR-NASD-2005-043 eff. April 1, 2005. Amended by SR-NASD-2005-022 eff. Feb. 4, 2005. Amended by SR-NASD-2004-020 eff. March 30, 2004. Amended by SR-NASD-2004-010 eff. Jan. 16, 2004. Adopted by SR-NASD-2002-154 eff. July 29, 2003. Selected Notice: 03-44. |
