Generally, the rules and regulations that apply to the relationship between the Research and Investment Banking departments of a firm include: - FINRA1 Conduct

Generally, the rules and regulations that apply to the relationship between the Research and Investment Banking departments of a firm include: - FINRA1 Conduct Rule 2711; - NYSE Rule 472; - SEC Regulation AC (Analyst Certification); - SEC Rules 137, 138, and 139 under the Securities Act of 1933. The Global Settlement of 2002 The Global Research Analyst Settlement (“Global Settlement”) is an enforcement agreement first announced in December 2002 and finalized on April 28, 2003, among the SEC, NASD (now FINRA), the NYSE, the New York State Attorney General and ten of the then-largest investment banking firms in the United States (the “Settling Firms”, the big 8 US banks plus UBS and Credit Suisse). The Global Settlement addressed issues related to conflicts of interest between the Research and Investment Banking departments these firms that became apparent during the “dot com” boom and then bust of the late 1990s and early 2000s. As part of the Global Settlement, the Settling Firms agreed to several rules designed to prevent abuse stemming from pressure by investment bankers research analysts to provide favorable coverage specific issuers or securities. The Settling Firms were required to separate their Investment Banking and Research departments from each other both physically and with information "firewalls". Additionally, the budget allocation for Research was to be independent of Investment Banking. Research analysts were also prohibited from attending pitches and road shows with investment bankers during the advertising and promotion of initial public offerings (IPOs). Finally, research analysts’ previously issued ratings about issuers had to be disclosed and made available. In addition to these regulatory actions, each Settling Firm was enjoined from violating the statutes and rules that it was alleged to have violated. The Settling Firms were also required to pay fines to their investors, fund investor education and pay for independent third-party market research. The total fine paid by the Settling Firms was approximately $1.435 billion, of which $387.5 million was restitution to harmed investors. The Global Settlement was amended in March 2010. Sarbanes-Oxley The Sarbanes-Oxley Act of 2002 required the SEC to address conflicts of interest involving research analysts and investment bankers. In response to Sarbanes-Oxley, the NASD and the NYSE established rules and safeguards to separate research analysts from the review, pressure and oversight of investment banking personnel. These rules are intended to ensure the integrity of research, and to protect investors from being misled as a result of a failure to disclose potential conflicts of interest.