The Research Objectivity Standards are a set of guiding principles developed by CFAI.
The ROS are not laws, but a voluntary code of conduct.
Note: The legal requirements of some jurisdictions may overlap with the intent of an ROS standard.
The ROS are aligned with the CFAI’s professional standards of conduct. Unlike the Soft Dollar Standards, a firm would not publicly claim compliance to ROS. However, at the member/candidate level, by violating an ROS standard, the individual may also be violating mandatory professional standard of conduct as well.
Requirements. Each standard is followed by one requirement, not necessarily the only one. CFAI makes further recommendations for compliance.
Research objectivity policy – must: be written and sent to all employees, contain supervisory procedures, and owned by a senior firm officer.
Public appearances – firm speaker must disclose any personal or firm conflicts of interest to the audience.
Reasonable and adequate basis – a supervisory analyst or committee must exist in the firm to review and approve all investment recommendations.
Firewall – firms must ensure that activities of the investment bank unit do not influence research or recommendations in the investment management unit.
Analyst compensation – must be aligned with research accuracy over a period of time; cannot be tied to any investment banking activity.
Subject companies – investment firm cannot promise a company with a specific investment recommendation or stock price target.
Personal investments and trading – firms must prevent employees from trading in ahead of clients.
Timeliness of recommendations – must be issued regularly; quarterly is the guidance, with updates as needed in response to significant events.
Compliance and enforcement – firms must keep records of their internal audit activities.
Disclosure – firms must disclose all conflicts of interest that affect the firm and covered employees.
Rating system – firms must establish a rating system that investors find useful in making decisions.
