[GA - PASSED] Independent Investment Research Protocol

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Indepedent Investment Research Protocol
Category: Free Trade | Strength: Mild
Proposed by: Simone Republic | Onsite Topic


The World Assembly,

Acknowledges
previous resolutions to protect the interest of investors (GAR#474);

Recognizing the reliance of investors on investment research written by analysts for decisions on financial instruments, especially on securities from jurisdictions outside of their own state or nation;

Noting that the views of analysts are not always favorable to particular stakeholders;

Anxious to protect the opinions of analysts for their independence, both from undue intervention by their employers and from frivolous or strategic litigation by other stakeholders;

Hereby defines:

"Analysts" as regulated and qualified financial analysts employed by a research department of an institution;

"Financial instruments" to include all securities, currencies, futures, options and all their respective derivatives traded in any WA member state;

"Institution" to mean a financial institution regulated by at least one member state;

"Investment research" as any written opinions and reports on financial instruments published by analysts under their own name on behalf of an institution in a member state and distributed to investors.

Hereby requires that:
  1. Institutions must:
    1. Impose information barriers, controlled by qualified staff, between their research department and any other department(s) that may have a material actual or potential conflict of interest with their research unit;
    2. Prohibit linking the compensation of analysts to the performance of any specific banking activities conducted by that institution;
    3. Prohibit any threats, or perceived threats, by another department of the institution against the analyst(s) or their research department(s) (or their respective compensation) over the contents of any investment research;
    4. Prohibit clearance or approval of investment research by persons employed by the institution who are not directly responsible for the research department, other than legal or compliance staff;
    5. Purchase adequate directors' and officers' liability insurance from a reputable insurer against any litigation directed at the institution, their research department(s) or their analysts.

  2. A published "investment research" report must disclose, in a very clear and legible font:
    1. Any material potential or actual conflicts as specified in clause (1)(a);
    2. Historical ratings and historical performance data pertinent to each of the said analysts who authored this report;
    3. If an entity that is the subject of the investment research has been provided with a copy the report prior to publication;
    4. Specifically disclose on the front page if (i) the investment research is published to support a client or proprietary position taken by that institution and/or (ii) is sponsored by any organization(s) with a material interest in the instruments covered;
    5. Any position(s) in any of the financial instruments mentioned in a report held by the analyst(s) who authored the report;
    6. Any other disclosures required by the competent authority of a member state with jurisdiction on the said report.

  3. In any litigation pending before any member state involving any published investment research:
    1. A petitioner against an analyst, a research unit, or the institution itself must prove beyond reasonable doubt of actual malice in any analysis and opinions published therein;
    2. The burden of proof is on the petitioner(s) in demonstrating actual malice and/or a reckless disregard for unambiguous factual statements published therein;
    3. The direction of any proprietary or client positions taken by any institution may not be admitted as evidence in any such litigation.

  4. A competent authority of a member state with jurisdiction is responsible for the implementation and interpretation of Clauses 1 and 2, and for any penalties that may be imposed.
Note: Only votes from TNP WA nations and NPA personnel will be counted. If you do not meet these requirements, please add (non-WA) or something of that effect to your vote.
Voting Instructions:
  • Vote For if you want the Delegate to vote For the resolution.
  • Vote Against if you want the Delegate to vote Against the resolution.
  • Vote Abstain if you want the Delegate to abstain from voting on this resolution.
  • Vote Present if you are personally abstaining from this vote.
Detailed opinions with your vote are appreciated and encouraged!


ForAgainstAbstainPresent
8005
 
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Overview
This proposal seeks to ensure the independence of research advising investors on their securities. To this end, it stipulates that investors are entitled to receive notice of any potential conflicts of interest, and analysts are to be protected from retributions by their employers should they publish research contravening their interests. It also tightens libel laws to alleviate the issue of "strategic lawsuits against publication" - suits filed by large companies against analysts to silence them - by increasing the burden of proof on the part of the petitioner.

Recommendation
We believe the protection of investors is important, and similar regulations have been in place in most real-world countries for some 20 years. Although some conflicts still prevail in these cases, such regulation has been proven to help reduce the most egregious examples of misconduct. By safeguarding analysts' ability to publish more negative research and ensuring its independence, all investors, large and small, benefit from a more efficient market.

As such, the Ministry of World Assembly Affairs recommends a vote For the General Assembly resolution at vote, "Independent Investment Research Protocol".
 
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