Risk & Compliance

Groups Hatch Issuer-Analyst Ethics Code

The Association for Investment Management and Research links up with the National Investor Relations Institute to halt the games that can cloud sec...
Marie LeoneMarch 12, 2004

Complaints that corporate issuers pressure securities analysts to sway their assessments have led two groups on different sides of the issue to hatch an ethics code to govern issuer-analyst relations.

The organizations — the Association for Investment Management and Research (AIMR) and the National Investor Relations Institute (NIRI) — are calling for public comment on their jointly drafted ethics guidelines. AIMR’s members include stock and fixed-income analysts and portfolio managers, while NIRI represents corporate investor-relations officers.

The guidelines are significant because both organizations have a track record of influencing new regulations. In fact, staffers from the Securities and Exchange Commission, the NASD, and the stock exchanges have already talked to the AIMR-NIRI joint task force about the pressure corporate issuers are exerting on research analysts, says AIMR vice president of professional standards Jonathan Boersman.

The first time the two groups have publicly worked together to clean up issuer-analyst relations.

The guidelines are aimed at squelching the securities-research games that go on between corporate issuers and analysts. They address information flow, analyst conduct, corporate communications and access, reviewing analysts reports and models, issuer-paid research, and other areas.

Now that regulators have cracked down on investment bankers, Boersman says, there are reports of company executives going straight to the analysts to put direct pressure on them for positive recommendations.

Will professional ethics guidelines curb overzealous players? That’s hard to tell, but the hopeful goal is to push the industry toward “research with integrity, where investors’ interests come first,” says Boersman.

The public comment period ends May 31.