NEW YORK, Dec. 18 /PRNewswire/ -- The Bond Market Association today issued
an exposure draft of guiding principles aimed at helping to foster independent
fixed income research. The Association's new principles are intended to
complement an extensive body of existing regulations both in the United States
and Europe and provide member firms with a common set of standards they can
use globally in developing their own policies and procedures to manage
potential conflicts of interest. The guidelines specifically focus on
fixed-income research and its unique characteristics.
"Our members, led by our Board of Directors, feel strongly there should be
a set of guiding principles tailored to fixed income research," said Micah S.
Green, president of The Bond Market Association. "Our effort will enhance
investor protection by promoting greater awareness of how potential conflicts
can be appropriately managed by integrated sell-side firms."
The publication of the guiding principles caps off a year-long
collaborative effort by Association member firms to share their thinking about
fixed income research practices and to standardize those practices to the
greatest extent possible, so that market participants have a common framework
for evaluating and, as necessary, modifying their own fixed income research
policies. The lengthy and specific document is the result of an extensive,
detailed and comprehensive effort on the part of the Association's members in
both the US and Europe. The principles can be accessed at
http://www.bondmarkets.com/market/research_principles.pdf . The Association is
welcoming comments from market participants at
researchprinciples@bondmarkets.com until February 17th and anticipates
finalizing its recommendations by March 1st. As part of this process, the
Association is co-sponsoring a workshop on the guiding principles for market
participants January 20th with the Asset Managers Forum and the Fixed Income
Analysts Society, Inc.
The Association chose a principles-based approach to ensure that differing
organizational structures, various types and uses of fixed income research and
the unique aspects of different fixed income markets could all be encompassed
within the framework.
"The Association's guiding principles represent an affirmative and
proactive industry effort to address and manage potential research conflicts
that may arise in the fixed income market," commented Paul Saltzman, executive
vice president and general counsel of the Association.
As a reference point, the guiding principles employ regulatory guidance
and principles promulgated by the US Securities and Exchange Commission, the
United Kingdom's Financial Services Authority, the European Commission and
other bodies for managing potential conflicts of interest faced by research
analysts.
The guiding principles focus on recommended steps to shield fixed income
research analysts and their decision-making processes from inappropriate
influences from elsewhere within firms. Specifically, the guiding principles
recommend the following:
-- Firms should promote the integrity of fixed income research and the
ability of fixed income research analysts to express their own
independent views by establishing prohibitions on promising favorable
fixed income research and on retaliation against research analysts for
research that may adversely affect a firm's investment banking or
sales and trading interests, and by ensuring decisions regarding fixed
income research coverage are made by research department personnel.
-- Supervisory and management structures should insulate fixed income
research analysts from review, pressure and control by investment
banking personnel, including reporting line structures and research
analyst performance evaluations, maintaining physical separation where
appropriate.
-- Firms should take measures to prevent inappropriate influence by
non-research department personnel and issuers over the content of
fixed income research reports and the timing of their publication.
-- Fixed income research analysts should be compensated in a manner
designed to promote their independence.
-- Firms should impose personal trading restrictions on fixed income
research analysts to manage potential conflicts of interest.
-- Firms and fixed income research analysts should inform investors of
potential conflicts of interest that may affect fixed income research.
-- Fixed income research analysts should not act as marketers or
solicitors of investment banking services.
-- Firms should manage potential conflicts of interest relating to their
trading desks and the publication of fixed income research, including
establishing a prohibition on improperly trading securities and
related derivative securities ahead of fixed income research reports,
and disclosing of potential conflicts of interest relating to the
trading desk.
-- Trader commentary, trading ideas and other analyses produced by
trading desk personnel must be clearly identified as such, and as
separate and distinct from research produced by the fixed income
research department.
-- Firms should allocate sufficient supervisory resources to promote the
integrity of the fixed income research process, including establishing
written policies and procedures and providing periodic training to
research analysts, research managers and investment banking personnel.
The Bond Market Association, with offices in New York, Washington, D.C.
and London, represents securities firms and banks that underwrite, trade and
sell debt securities in the U.S. and globally.
SOURCE The Bond Market Association
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Related links:
http://www.bondmarkets.com
CONTACT:
Jon Teall, +1-646-637-9279, or Katrina
Keller, +1-646-637-9281, both for The Bond Market Association
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