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Rule 344 Research Analysts and Supervisory Analysts

SR-FINRA-2017-007 has been approved by the SEC. Effective October 1, 2018, this rule will no longer be applicable. Please consult the appropriate FINRA rule.

/01 Research Analysts

Qualifications

Research Analyst candidates shall qualify by taking the Research Analyst Qualification Examination (“Series 86/87”). For purposes of this interpretation, the term “research analyst” is defined in Rule 344.10. The Series 86 covers security analysis and valuation of equity securities. The Series 87 covers pertinent rules and regulations of the self-regulatory organizations, and the SEC.

Prerequisite

The General Securities Registered Representative Examination (“Series 7”) qualification is a prerequisite for any Research Analyst candidate prior to taking either Part I (“Series 86”) or Part II (“Series 87”) of the Research Analyst Qualification Examination.

Alternatively, the United Kingdom Limited Registered Representative (“Series 17”) Examination and the Canadian Limited Registered Representative (“Series 37/38”) Examination will also serve as prerequisites to taking either Part I or Part II of the Research Analyst Qualification Examination.

In satisfying the Series 7, Series 17 or Series 37/38 examination prerequisite, Research Analyst candidates will not be required to complete the four-month training period required of Registered Representative candidates nor do they have to be approved by the Exchange pursuant to Rule 345.15/02.

Candidates that have failed either Part I or II of the Research Analyst Qualification Examination must wait 30 days before re-taking either part of the examination.

Exemptions

Successful completion of Levels I and II of the Charter Financial Analyst (“CFA”) Examination administered by the CFA Institute allows a Research Analyst candidate to request an exemption from Part I (“Series 86”) of the Research Analyst Qualification Examination. If an exemption is granted for Part I (“Series 86”), a candidate will be qualified as a Research Analyst after passing Part II (“Series 87”) and the prerequisite examination (i.e., Series 7, 17, or 37/38 examinations).

Successful completion of Levels I and II of the Chartered Market Technician Program (“CMT”) administered by the Market Technician Association (“MTA”) allows a Research Analyst candidate who prepares only technical research reports to request an exemption from Part I (“Series 86”) of the Research Analyst Qualification Examination. If an exemption is granted for Part I (“Series 86”), a candidate will be qualified as a Research Analyst only after passing Part II (“Series 87”) and the prerequisite examination (i.e., Series 7, 17, or 37/38 examinations).

To qualify for a CFA or CMT exemption a Research Analyst candidate must have: (i) completed the CFA Level II or CMT Level II within two years of application for registration or (ii) functioned as a research analyst continuously since having passed the CFA Level II or CMT Level II. Applicants that have completed the CFA Level II or CMT Level II that do not meet criteria (i) or (ii) may where good cause is shown based upon previous related employment experience make a written request to the Exchange for an exemption.

A technical research report is a research report as defined in Rule 472.10(2) that is based solely on stock price movement and trading volume and not on the subject company's financial information, business prospects, contact with the subject company's management, or the valuation of a subject company's securities.
/02 Foreign Research Analysts

Exemption

The requirement to register as a research analyst pursuant to NYSE Rule 344.10 shall not apply to an associated person who: (1) is an employee of a non-member foreign affiliate of a member organization (“foreign research analyst”), (2) resides outside the United States and (3) contributes, partially or entirely, to the preparation of globallybranded or foreign affiliate research reports but does not contribute to the preparation of a member organization's research, including a mixedteam report, that is not globally-branded, provided that the following conditions are satisfied:

Supervisory Review

Member organizations that publish or otherwise distribute globallybranded research reports partially or entirely prepared by a foreign research analyst must subject such research to pre-use review and approval by a supervisory analyst in accordance with NYSE Rule 344.11 or by a registered principal in accordance with NASD Rule 1022(a)(5). In addition, the member organization must ensure that such research reports comply with NYSE Rule 472, as applicable.

Disclosure

In publishing or otherwise distributing globally-branded research reports partially or entirely prepared by a foreign research analyst, a member organization must prominently disclose:
(1) each affiliate contributing to the research report;
(2) the names of the foreign research analysts employed by each contributing affiliate;
(3) that such research analysts are not registered/qualified as research analysts with the NYSE and/or NASD; and
(4) that such research analysts may not be associated persons of the member organization and therefore may not be subject to the NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
The disclosures required by 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.
     Record Keeping

Member organizations 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 NYSE Rule 344.

Member organizations must also establish and maintain records that evidence compliance with the applicable content, disclosure and supervision provisions of NYSE Rule 472. Member organizations must maintain these records in accordance with the supervisory requirements of NYSE Rule 342, 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 NYSE Rule 472.

Application of the Federal Securities Laws, Rules and Regulations and Self-Regulatory Organization Rules

The foregoing shall not 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.

Effect of Exemption on Associated Person Status

The fact that a foreign research analyst avails himself of this exemption shall not be probative of whether that individual is an associated person of the member organization for other purposes, including whether the foreign research analyst is subject to the NYSE 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Globally-Branded Research Report

A globally-branded research report refers to the use of a single marketing identity that encompasses the member organization and one or more of its affiliates.

Mixed-Team Research Report

A mixed-team research report refers to any member organization research report that is not globally-branded and includes a contribution by a research analyst who is not an associated person of the member organization.

Affiliate

For the purposes of this exemption, the term affiliate shall mean a person that directly or indirectly controls, is controlled by, or is under common control with, a member organization.
/03 Supervisory Analysts

Qualifications

Supervisory Analyst candidates shall qualify by taking and passing the Supervisory Analyst (“Series 16”) Examination.

Experience

Appropriate experience for a candidate for Supervisory Analyst means having at least three years prior experience within the immediately preceding six years involving securities or financial analysis.

Examples of appropriate experience may include the following:
•   Equity or Fixed Income Research Analyst;
•   Credit Analyst for a securities rating agency;
•   Supervising preparation of materials prepared by financial/securities analysts;
•   Financial analytical experience gained at banks, insurance companies or other financial institutions;
•   Academic experience relating to the financial/securities markets/industry.
Director of Research

A person having the title of “Director of Research” need not be a supervisory analyst as defined by the Rule so long as he/she does not approve research reports. If, however, such a person is in charge of registered representatives, he/she must qualify as a supervisory person under Rule 342.13.
/04 Exemptions

Successful completion of the CFA Level I Examination administered by the CFA Institute (in lieu of completion of Levels, I, II and III for a full CFA designation) will suffice to allow a Supervisory Analyst candidate to qualify by taking Part I of the Series 16 Qualification Examination.
Amendment.
Amended by SR-FINRA-2007-010 eff. Apr. 7, 2008;
Amended by SR-FINRA-2008-012 eff. Apr. 3, 2008.

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