The report from the Forum Group on Financial Analysts set out new principles designed to stamp out conflicts of interest in Europe's big firms that provide both investment banking services and research. It focuses on dividing analysis and investment banking departments within a company, and ensuring that regulators approve the safeguards put in place.
The five core principles which the Forum Group believes should be applied by those producing and disseminating investment research, are:
Clarity: research should be fair, clear and not misleading
Competence, conduct and personal integrity: research should be produced by competent analysts with skill, care, diligence and integrity; and it should reflect the opinion of its author(s)
Suitability and market integrity: research should be distributed taking into account the different categories of its intended recipients and the need to maintain market integrity
Conflict avoidance, prevention and management: analysts' firms should have in place systems and controls to identify and avoid, prevent or manage personal and corporate conflicts of interest
Disclosure: conflicts of interest, whether corporate or personal, should be prominently disclosed.
The report makes 31 recommendations which relate to these principles. Most recommendations deal with the relationship between analysts and investment bankers in large unified firms.
The Commission has launched a consultation on the Forum Group's findings, on the way towards deciding whether further EU action is needed. The Commission welcomes comments on the Forum Group's findings until 30th November 2003.
Report download site
Commissionn press release
© European Commission
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