B. Independence and Objectivity.
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Procedures for compliance
Members should follow certain practices and should encourage their firms to establish certain procedures to avoid violations of this standard.
- Protect integrity of opinions. Members and their firms should establish policies stating that every research report on issuers by a corporate client reflects the unbiased opinion of the analyst. Firms should also design compensation systems that protect the integrity of the investment decision process by maintaining the independence and objectivity of analysts.
- Create a restricted list. If the senior managers at a member's firm are unwilling to permit dissemination of adverse opinions about a corporate client, the firm should remove the controversial company from the research universe and put it on a restricted list so that the firm disseminates only factual information about the company.
- Restrict special cost arrangements. When attending meetings at an issuer's headquarters, a member should pay for commercial transportation and hotel charges. No corporate issuer should reimburse a member for transportation. Members should encourage issuers to limit the use of corporate aircraft to situations in which commercial transportation is not available or in which efficient movement could not otherwise be arranged. Members should take particular care that when frequent meetings are held between an individual issuer and an individual member the issuer is not always the host of the member.
- Limit gifts. Members should limit the acceptance of gratuities and/or gifts to token items. The standard does not preclude customary, ordinary, business-related entertainment so long as its purpose is not to influence or reward members.
- Review procedures. Members should implement (or encourage their firms to implement) effective supervisory and review procedures to ensure that analysts and portfolio managers comply with policies relating to their personal investment activities.