- Best Practices Guidelines -
Relevant Guidelines Concerning Practice
These guidelines’ objective is to help in upholding and advancing the standards in the securities market and financial service industry. This aim is achieved by encouraging ethical dealings and conduct in the financial market.
Best Practise Guidelines for Research Integrity
The analyst has to encourage the smooth running of the market by collecting and examining information while also making available some perception of market analysis and industry trends. However, in instances where the financial analyst’s firm provides research services alongside other financial and corporate services, the similarities between these services make it prone to conflict of interests.
If these conflicts are not well managed, it could have serious consequences such as spoil investor confidence, incur a loss, affect the economy etc. SDIA developed the best practice guidelines for research integrity to help financial analysts and their companies control potential conflicts of interest, which may threaten the integrity of the analyst’s work output.
The code stated in these guidelines provides a standard against which appropriate persons may evaluate research and investment recommendations. These standards include the following.
Prioritising the Investor’s Financial Interest
Analysts have a foremost duty of prioritising the interest of the investors. However, this duty must not be influenced by personal interest. Analysts must exercise independence and utmost discretion in carrying out their duties to produce reliable research reports and investment recommendations.
Creating Independent Reporting Structure
When a financial services firm offers overlapping and similar financial services, they should create independent and distinct reporting structures to ensure the research report’s transparency and investment recommendations.
Creating Virtual Barriers to Prevent the Exchange of Informatio
Research firms should create well-defined ethical barriers within the firm to prevent the sharing of information. These barriers should also be accompanied by the right compliance procedures to not jeopardise the integrity of results out by the firm.
Revealing of Interest
Before a research report and investment recommendation are publicly announced, all vested interests, whether economic or otherwise that the analysts have in the report which might have influenced the report has to be publicly disclosed.
Having Policies and Procedures in Place on Restricting Trade Firm
This is to prevent a prospective conflict of interest from arising. Analysts should not involve themselves in activities that are inconsistent with their investment recommendations.
Clarity of Investment Recommendation
Investment recommendations and research reports must, at all times, be clear, consistent, and transparent. It must not be vague, abstract or ambiguous. Also, relevant persons must disclose all research relevant to the investment recommendations, or that might influence its change on time.
The Firm’s Statement of Policies and Procedure
Financial services firm must generate a statement or written document that states its policies and procedures for handling conflicts of interests that are likely to come up and threaten the transparency and integrity of the research reports and investment recommendations.
These policies must be subjected to scrutiny from time to time to ensure they are still relevant. These statements must also be readily available to the investors at all times.