NASD Notice to Members 05-34 - May 2005

SEC Approves Amendments to Rule 2711 to Prohibit Research Analysts from Participating in a Road Show and from Communicating with Customers in the Presence of Investment Banking Personnel or Company Management about an Investment Banking Services Transaction; Compliance Date: June 6, 2005

Executive Summary

The Securities and Exchange Commission (SEC) has approved amendments to Rule 2711 (Research Analysts and Research Reports) to further insulate research analysts from the potential influences of the investment banking department. The amendments prohibit (1) a research analyst from participating in a road show related to an investment banking services transaction and from engaging in any communication with a current or prospective customer in the presence of investment banking department personnel or company management about an investment banking services transaction and (2) investment banking department personnel from directing a research analyst to engage in sales and marketing efforts and other communications with a customer about an investment banking services transaction. The proposed rule change expressly permits analysts to educate investors and internal personnel about an investment banking services transaction, provided such communications are "fair, balanced and not misleading."

The new rule can be found in Attachment A of this Notice and becomes effective on June 6, 2005.

 

Questions or comments concerning this Notice may be directed to Philip Shaikun, Associate General Counsel, Regulatory Policy and Oversight, at (202)-728-8451.