April 28, 2003
A $1.4 billion global research settlement was finally reached, changing the way Wall Street will do business in the future.
- The firms will physically separate their research and investment banking departments to prevent the flow of information between the two groups.
- The firms' senior management will determine the research department's budget without input from investment banking and without regard to specific revenues derived from investment banking.
- Research analysts' compensation may not be based, directly or indirectly, on investment banking revenues or input from investment banking personnel, and investment bankers will have no role in evaluating analysts' job performance.
- Research management will make all company-specific decisions to terminate coverage, and investment bankers will have no role in company-specific coverage decisions.
- Research analysts will be prohibited from participating in efforts to solicit investment banking business, including pitches and roadshows. During the offering period for an investment banking transaction, research analysts may not participate in roadshows or other efforts to market the transaction.
- The firms will create and enforce firewalls restricting interaction between investment banking and research except in specifically designated circumstances.
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