There have been a number of important developments and proposals regarding securities and derivatives research that complicate regulatory compliance and will likely affect the structure of research and other functions at multiservice banks. In particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and agency rules create new research-related requirements for swaps market intermediaries, and the Financial Industry Regulatory Authority (FINRA) has proposed new requirements for debt research. These initiatives extend to new instruments the same types of safeguards against potential conflicts of interest and other abuses that have been developed for equity research, though with important differences. By contrast and somewhat paradoxically, the Jumpstart Our Business Startups Act (the JOBS Act) relaxed limitations regarding the publication of research reports concerning smaller companies, but not for larger and more established issuers.
This article discusses the compliance challenges that financial institutions must contend with as they engineer new compliance processes and organizational structures to accommodate evolving research-related regulatory mandates that differ by product and issuer type.
