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Question 1 of 10
1. Question
Regarding efforts to solicit investment banking business, why would FINRA consider the publication in a pitch book or related materials of an analyst’s industry ranking to imply the potential outcome of future research?
Correct
2242. Debt Research Analysts and Debt Research Reports
Efforts to Solicit Investment Banking Business.FINRA would consider the publication in a pitch book or related materials of an analyst’s industry ranking to imply the potential outcome of future research because of the manner in which such rankings are compiled. On the other hand, a member would be permitted to include in the pitch materials the fact of coverage and the name of the debt research analyst because such information alone does not imply favorable coverage.Incorrect
2242. Debt Research Analysts and Debt Research Reports
Efforts to Solicit Investment Banking Business.FINRA would consider the publication in a pitch book or related materials of an analyst’s industry ranking to imply the potential outcome of future research because of the manner in which such rankings are compiled. On the other hand, a member would be permitted to include in the pitch materials the fact of coverage and the name of the debt research analyst because such information alone does not imply favorable coverage. -
Question 2 of 10
2. Question
Regarding Information Barriers between Research Analysts and Trading Desk Personnel, what to prohibit FINRA interprets paragraph (b)(1)(C) of this Rule to, among other things, require members to establish, maintain and enforce written policies and procedures reasonably designed?
Correct
2242. Debt Research Analysts and Debt Research Reports
Information Barriers between Research Analysts and Trading Desk Personnel.FINRA interprets paragraph (b)(1)(C) of this Rule to, among other things, require members to establish, maintain and enforce written policies and procedures reasonably designed to prohibit:
(1) Sales and trading and principal trading personnel attempting to influence a debt research analyst’s opinion or views for the purpose of benefiting the trading position of the firm, a customer or a class of customers; and
(2) Debt research analysts identifying or recommending specific potential trading transactions to sales and trading or principal trading personnel that are inconsistent with such debt research analyst’s currently published debt research reports, or disclosing the timing of, or material investment conclusions in, a pending debt research report.Incorrect
2242. Debt Research Analysts and Debt Research Reports
Information Barriers between Research Analysts and Trading Desk Personnel.FINRA interprets paragraph (b)(1)(C) of this Rule to, among other things, require members to establish, maintain and enforce written policies and procedures reasonably designed to prohibit:
(1) Sales and trading and principal trading personnel attempting to influence a debt research analyst’s opinion or views for the purpose of benefiting the trading position of the firm, a customer or a class of customers; and
(2) Debt research analysts identifying or recommending specific potential trading transactions to sales and trading or principal trading personnel that are inconsistent with such debt research analyst’s currently published debt research reports, or disclosing the timing of, or material investment conclusions in, a pending debt research report. -
Question 3 of 10
3. Question
Regarding Information Barriers between Research Analysts and Trading Desk Personnel, which of the following statement(s) is/are incorrect when communications between debt research analysts and sales and trading or principal trading personnel are permitted?
Correct
2242. Debt Research Analysts and Debt Research Reports
Information Barriers between Research Analysts and Trading Desk Personnel.The following communications between debt research analysts and sales and trading or principal trading personnel are permitted:
(1) Sales and trading and principal trading personnel may communicate customers’ interests to a debt research analyst, so long as the debt research analyst does not respond by publishing debt research for the purpose of benefiting the trading position of the firm, a customer or a class of customers;
(2) Debt research analysts may provide customized analysis, recommendations or trade ideas to sales and trading and principal trading personnel and customers, provided that any such communications are not inconsistent with the analyst’s currently published or pending debt research, and that any subsequently published debt research is not for the purpose of benefiting the trading position of the firm, a customer or a class of customers;
(3) Sales and trading and principal trading personnel may seek the views of debt research analysts regarding the creditworthiness of the issuer of a debt security and other information regarding an issuer of a debt security that is reasonably related to the price/performance of the debt security, so long as, with respect to any covered issuer, such information is consistent with the debt research analyst’s published debt research report and consistent in nature with the types of communications that a debt research analyst might have with customers. In determining what is consistent with the debt research analyst’s published debt research, a member may consider the context, including that the investment objectives or time horizons being discussed differ from those underlying the debt research analyst’s published views; and
(4) Debt research analysts may seek information from sales and trading and principal trading personnel regarding a particular bond instrument, current prices, spreads, liquidity and similar market information relevant to the debt research analyst’s valuation of a particular debt security.Incorrect
2242. Debt Research Analysts and Debt Research Reports
Information Barriers between Research Analysts and Trading Desk Personnel.The following communications between debt research analysts and sales and trading or principal trading personnel are permitted:
(1) Sales and trading and principal trading personnel may communicate customers’ interests to a debt research analyst, so long as the debt research analyst does not respond by publishing debt research for the purpose of benefiting the trading position of the firm, a customer or a class of customers;
(2) Debt research analysts may provide customized analysis, recommendations or trade ideas to sales and trading and principal trading personnel and customers, provided that any such communications are not inconsistent with the analyst’s currently published or pending debt research, and that any subsequently published debt research is not for the purpose of benefiting the trading position of the firm, a customer or a class of customers;
(3) Sales and trading and principal trading personnel may seek the views of debt research analysts regarding the creditworthiness of the issuer of a debt security and other information regarding an issuer of a debt security that is reasonably related to the price/performance of the debt security, so long as, with respect to any covered issuer, such information is consistent with the debt research analyst’s published debt research report and consistent in nature with the types of communications that a debt research analyst might have with customers. In determining what is consistent with the debt research analyst’s published debt research, a member may consider the context, including that the investment objectives or time horizons being discussed differ from those underlying the debt research analyst’s published views; and
(4) Debt research analysts may seek information from sales and trading and principal trading personnel regarding a particular bond instrument, current prices, spreads, liquidity and similar market information relevant to the debt research analyst’s valuation of a particular debt security. -
Question 4 of 10
4. Question
Regarding Disclosure of Compensation Received by Affiliates, when should a member disclose compensation received by its affiliates from the subject company (including any foreign sovereign)?
Correct
2242. Debt Research Analysts and Debt Research Reports
Disclosure of Compensation Received by Affiliates.A member must disclose compensation received by its affiliates from the subject company (including any foreign sovereign) in the past 12 months when the debt research analyst or an associated person with the ability to influence the content of a debt research report has actual knowledge that an affiliate received such compensation during that time period.Incorrect
2242. Debt Research Analysts and Debt Research Reports
Disclosure of Compensation Received by Affiliates.A member must disclose compensation received by its affiliates from the subject company (including any foreign sovereign) in the past 12 months when the debt research analyst or an associated person with the ability to influence the content of a debt research report has actual knowledge that an affiliate received such compensation during that time period. -
Question 5 of 10
5. Question
Which of the following statement(s) is untrue regarding the sections of a draft debt research report be provided to non-investment banking personnel, non-principal trading personnel, non-sales and trading personnel or to the subject company for factual review?
Correct
2242. Debt Research Analysts and Debt Research Reports
Submission of Sections of a Draft Research Report for Factual Review.Consistent with the requirements of paragraphs (b)(2)(B) and (N) of this Rule, sections of a draft debt research report may be provided to non-investment banking personnel, non-principal trading personnel, non-sales and trading personnel or to the subject company for factual review, if:
(a) the sections of the draft debt research report submitted do not contain the research summary, recommendation or rating;
(b) a complete draft of the debt research report is provided to legal or compliance personnel before sections of the report are submitted to non-investment banking personnel, non-principal trading personnel, non-sales and trading personnel or the subject company; and
(c) if, after submitting sections of the draft debt research report to non-investment banking personnel, non-principal trading personnel, non-sales and trading personnel or the subject company, the research department intends to change the proposed rating or recommendation, it must first provide written justification to, and receive written authorization from, legal or compliance personnel for the change. The member must retain copies of any draft and the final version of such debt research report for three years after publication.Incorrect
2242. Debt Research Analysts and Debt Research Reports
Submission of Sections of a Draft Research Report for Factual Review.Consistent with the requirements of paragraphs (b)(2)(B) and (N) of this Rule, sections of a draft debt research report may be provided to non-investment banking personnel, non-principal trading personnel, non-sales and trading personnel or to the subject company for factual review, if:
(a) the sections of the draft debt research report submitted do not contain the research summary, recommendation or rating;
(b) a complete draft of the debt research report is provided to legal or compliance personnel before sections of the report are submitted to non-investment banking personnel, non-principal trading personnel, non-sales and trading personnel or the subject company; and
(c) if, after submitting sections of the draft debt research report to non-investment banking personnel, non-principal trading personnel, non-sales and trading personnel or the subject company, the research department intends to change the proposed rating or recommendation, it must first provide written justification to, and receive written authorization from, legal or compliance personnel for the change. The member must retain copies of any draft and the final version of such debt research report for three years after publication. -
Question 6 of 10
6. Question
Regarding Distribution of Member Research Products, whom should a member provide different debt research products and services to?
Correct
2242. Debt Research Analysts and Debt Research Reports
Distribution of Member Research Products. With respect to paragraph (f) of this Rule, a member may provide different debt research products and services to different classes of customers. For example, a member may offer one debt research product for those with a long-term investment horizon (“investor research”) and a different debt research product for those customers with a short-term investment horizon (“trading research”). These products may lead to different recommendations or ratings, provided that each is consistent with the meaning of the member’s ratings system for each respective product.Incorrect
2242. Debt Research Analysts and Debt Research Reports
Distribution of Member Research Products. With respect to paragraph (f) of this Rule, a member may provide different debt research products and services to different classes of customers. For example, a member may offer one debt research product for those with a long-term investment horizon (“investor research”) and a different debt research product for those customers with a short-term investment horizon (“trading research”). These products may lead to different recommendations or ratings, provided that each is consistent with the meaning of the member’s ratings system for each respective product. -
Question 7 of 10
7. Question
Regarding Ability to Influence the Content of a Debt Research Report, an associated person with the ability to influence the content of a debt research report is an associated person who is/has …
Correct
2242. Debt Research Analysts and Debt Research Reports
Ability to Influence the Content of a Debt Research Report. For the purposes of this Rule, an associated person with the ability to influence the content of a debt research report is an associated person who is required to review the content of the debt research report or has exercised authority to review or change the debt research report prior to publication or distribution. This term does not include legal or compliance personnel who may review a debt research report for compliance purposes but are not authorized to dictate a particular recommendation or rating.Incorrect
2242. Debt Research Analysts and Debt Research Reports
Ability to Influence the Content of a Debt Research Report. For the purposes of this Rule, an associated person with the ability to influence the content of a debt research report is an associated person who is required to review the content of the debt research report or has exercised authority to review or change the debt research report prior to publication or distribution. This term does not include legal or compliance personnel who may review a debt research report for compliance purposes but are not authorized to dictate a particular recommendation or rating. -
Question 8 of 10
8. Question
Regarding Obligations of Persons Associated with a Member, consistent with Rule 0140, what shall be a violation of this Rule for an associated person?
Correct
2242. Debt Research Analysts and Debt Research Reports
Obligations of Persons Associated with a Member. Consistent with Rule 0140, persons associated with a member must comply with such member’s written policies and procedures as established pursuant to this Rule. In addition, consistent with Rule 0140, it shall be a violation of this Rule for an associated person to engage in the restricted or prohibited conduct to be addressed through the establishment, maintenance and enforcement of written policies and procedures required by this Rule or related Supplementary Material.Incorrect
2242. Debt Research Analysts and Debt Research Reports
Obligations of Persons Associated with a Member. Consistent with Rule 0140, persons associated with a member must comply with such member’s written policies and procedures as established pursuant to this Rule. In addition, consistent with Rule 0140, it shall be a violation of this Rule for an associated person to engage in the restricted or prohibited conduct to be addressed through the establishment, maintenance and enforcement of written policies and procedures required by this Rule or related Supplementary Material. -
Question 9 of 10
9. Question
Regarding Distribution of Institutional Debt Research During Transition Period, whom should a member distribute institutional debt research?
Correct
2242. Debt Research Analysts and Debt Research Reports
Distribution of Institutional Debt Research During Transition Period. A member may distribute institutional debt research to any person that meets the definition of “institutional account” in Rule 4512(c), other than a natural person, for a period of up to one-year after July 16, 2015 (“the transition period”).Incorrect
2242. Debt Research Analysts and Debt Research Reports
Distribution of Institutional Debt Research During Transition Period. A member may distribute institutional debt research to any person that meets the definition of “institutional account” in Rule 4512(c), other than a natural person, for a period of up to one-year after July 16, 2015 (“the transition period”). -
Question 10 of 10
10. Question
While Distribution of Institutional Debt Research to Non-U.S. Investors, the requirements of this Rule shall not apply to the distribution of an institutional debt research report by a non-U.S. affiliate of a member to a non-U.S. investor, if …
Correct
2242. Debt Research Analysts and Debt Research Reports
Distribution of Institutional Debt Research to Non-U.S. Investors. The requirements of paragraphs (j)(1)(A) and (B) of this Rule shall not apply to the distribution of an institutional debt research report by a non-U.S. affiliate of a member to a non-U.S. investor, provided that:
(a) The non-U.S. investor is not a customer of the member;
(b) The non-U.S. investor is a customer of the non-U.S. affiliate of the member; and
(c) The non-U.S. affiliate of the member has a reasonable basis to believe that the customer meets the definition of “institutional account” in Rule 4512(c).Incorrect
2242. Debt Research Analysts and Debt Research Reports
Distribution of Institutional Debt Research to Non-U.S. Investors. The requirements of paragraphs (j)(1)(A) and (B) of this Rule shall not apply to the distribution of an institutional debt research report by a non-U.S. affiliate of a member to a non-U.S. investor, provided that:
(a) The non-U.S. investor is not a customer of the member;
(b) The non-U.S. investor is a customer of the non-U.S. affiliate of the member; and
(c) The non-U.S. affiliate of the member has a reasonable basis to believe that the customer meets the definition of “institutional account” in Rule 4512(c).