Series 87 — Research Analyst Qualification Examination (Part II) Cheat Sheet
Compact FINRA Series 87 Cheat sheet for research analyst rules, conflicts, disclosures, Reg AC, Reg FD, and offering-related research scenarios.
Use the tables for a quick pre-exam check. Expand a topic’s notes for explanations, examples, and additional distinctions.
Scope and study context
| Focus area | Know cold | Common exam trap |
|---|---|---|
| FINRA Rule 2241 | Equity research analyst conflicts, disclosures, report content, prepublication review | Treating disclosure as permission to issue biased or misleading research |
| FINRA Rule 2242 | Debt research conflicts, retail vs institutional debt research, sales/trading interaction | Assuming debt research rules are identical to equity research rules |
| Regulation AC | Analyst certifications in reports and public appearance records | Forgetting compensation-related certification/disclosure |
| Regulation FD and insider trading | Selective disclosure, MNPI, tipping, mosaic theory | Thinking Reg FD only affects issuers and never creates analyst risk |
| Offering-related research | Research as a potential “offer,” Rules 137/138/139, EGC/JOBS Act concepts | Using a safe harbor as an antifraud shield |
| Supervision and records | WSPs, information barriers, approvals, personal trading surveillance | Letting investment banking supervise or pressure research |
Core Definitions
| Term | Exam meaning | High-yield note |
|---|---|---|
| Research analyst | Associated person primarily responsible for the substance of a research report | Includes persons who report to the analyst in connection with report preparation |
| Research report | Written or electronic communication with analysis of an issuer/security and enough information to support an investment decision | A recommendation is not required if the analysis is sufficient |
| Equity research report | Research report on an equity security or issuer | Governed mainly by FINRA Rule 2241 |
| Debt research report | Research report on a debt security or debt issuer | Governed mainly by FINRA Rule 2242 |
| Public appearance | Analyst communication in a seminar, forum, media interview, conference call, webcast, or similar setting | Not a research report, but conflict disclosures still matter |
| Subject company | Issuer whose securities are the subject of the report or public appearance | Disclosure triggers are usually tied to this issuer |
| Investment banking services | Underwriting, selling group participation, M&A advisory, placement agent work, venture capital/equity lines, or similar services | Conflicts arise even when the firm merely expects or intends to seek business |
| Research analyst account | Account where the analyst or household member has a financial interest, discretion, or control | Personal trading rules apply; diversified third-party-managed funds are typically treated differently |
| Member of household | Person whose principal residence is the same as the analyst’s | Ownership by household members can trigger analyst financial-interest disclosures |
| Independent third-party research | Research prepared by a non-affiliated third party without member input or influence | Distribution still requires review controls and conflict awareness |
| Eligible institutional investor | Institutional recipient meeting Rule 2242 conditions for institutional debt research | Debt research flexibility depends on recipient status and consent process |
Notes and examples
Research Report, Analyst, Account, and Public Appearance
| Term | Quick exam definition | Candidate trap |
|---|---|---|
| Research report | Written or electronic communication with analysis of securities or issuers that provides enough information to support an investment decision | A short “rating change” with no analysis may be treated differently from a full research report |
| Research analyst | Associated person primarily responsible for preparing the substance of a research report, plus certain persons assisting or reporting in that process | Job title is not controlling; function matters |
| Research analyst account | Account in which the analyst or household member has a financial interest or control, subject to rule exceptions | Candidates forget household accounts |
| Subject company | Issuer that is the focus of the research report or public appearance | Conflicts are evaluated issuer by issuer |
| Public appearance | Public speaking, media appearance, seminar, interview, or similar communication by a research analyst | Oral comments can trigger disclosure duties |
| Third-party research | Research prepared by someone other than the distributing member | Distribution still requires due diligence and conflict review |
| Debt research | Research on debt securities or debt issuers, with special institutional debt research treatment under FINRA rules | Do not assume equity and debt rules are identical |
Is It a Research Report?
| Communication | Usually a research report? | Why it matters |
|---|---|---|
| Written report analyzing ABC Corp. stock with valuation support | Yes | Equity research report rules, disclosures, supervision, and certifications apply |
| Email analyzing XYZ bonds and issuer credit quality for a customer | Yes | Debt research report rules may apply |
| Broad market update with no individual company analysis | No | Still subject to general communications and antifraud standards |
| Economic commentary on rates, inflation, or GDP | No | Not issuer-specific investment analysis |
| Statistical screen listing several companies’ financial data with no analysis | Usually no | Be alert if the “screen” includes company-specific conclusions |
| Notice of a rating or price-target change with no analysis | Usually excluded from research report definition | But selective dissemination and fair-dealing concerns remain |
| Mutual fund, DPP, or commodity-pool sales material | Usually outside research report rules | Still subject to applicable communications rules |
| Prospectus or statutory offering document | Not a research report for these rules | Offering and antifraud rules still apply |
| Internal-only research not distributed to customers | Not customer research | Confidentiality, information barriers, and trading-ahead controls still matter |
| Analyst TV interview discussing a covered company | Public appearance, not a report | Oral disclosures are tested frequently |
| Third-party report distributed by a member firm | Treated seriously | The firm cannot blindly distribute misleading or conflicted content |
Equity vs Debt Research: Rule 2241 and Rule 2242
| Issue | Equity research: FINRA Rule 2241 | Debt research: FINRA Rule 2242 | Exam cue |
|---|---|---|---|
| Main concern | Investment banking conflicts, ratings, price targets, analyst independence | Investment banking plus sales/trading/principal-trading conflicts | Debt desks create conflicts different from equity banking |
| Retail protections | Full rule framework applies | Full retail debt research framework applies | Retail recipient usually means stricter answer |
| Institutional flexibility | No broad institutional carveout like debt research | Institutional debt research can receive modified treatment if conditions are met | Look for “eligible institutional investor” and consent |
| Sales/trading interaction | Must not influence research conclusions | More market-color interaction is permitted, but pressure and control are prohibited | “Market color” is not the same as dictating a rating |
| Prepublication review | Restricted; no investment banking control | Restricted; no sales/trading or investment banking control | Legal/compliance gating is key |
| Analyst compensation | Not tied to specific investment banking transactions | Not tied to specific investment banking or trading transactions | Compensation committee/process must be independent |
| Personal trading | Research analyst account restrictions apply | Similar conflict controls apply, with debt-specific context | Trading opposite a recommendation is a red flag |
| Disclosures | Detailed issuer, analyst, firm, rating, price-target disclosures | Debt-focused conflict disclosures; institutional debt reports may differ | Do not copy equity price-chart rules mechanically into debt scenarios |
Notes and examples
Equity Research vs. Debt Research
FINRA rules distinguish equity research and debt research. The exam may test which framework applies.
| Area | Equity research | Debt research |
|---|---|---|
| Main focus | Equity securities, ratings, price targets, issuer fundamentals | Debt securities, credit quality, structure, yield, covenants, default risk |
| Customer impact | Often retail and institutional | Often heavily institutional, but retail protections still matter |
| Conflict concerns | Investment banking, market making, analyst ownership, rating pressure | Trading desk influence, institutional client flows, debt underwriting, issuer access |
| Disclosures | Detailed research report disclosures | Disclosures vary depending on retail/institutional treatment |
| Institutional treatment | Less central than in debt rule | Institutional debt research has special exemptions/conditions |
| Trap | Applying debt institutional exemptions to retail equity research | Applying equity price-target logic mechanically to all debt research |
Debt Research Exam Points
For debt research, focus on:
- Whether the communication is retail debt research or institutional debt research.
- Whether the recipient qualifies for institutional treatment.
- Whether the firm has obtained required consents or followed required procedures.
- Whether conflicts are still managed even when some retail-style protections do not apply.
- Whether sales/trading influence compromises research independence.
Conflict Controls: Prohibited, Restricted, or Permitted
Conduct That Is Usually Prohibited or a Major Red Flag
| Conduct | Rule principle | Exam answer tendency |
|---|---|---|
| Investment banking supervises research analysts | Research must be independent from banking | Prohibited |
| Investment banking approves a research rating or price target | Banking cannot control research content | Prohibited |
| Analyst participates in an investment banking pitch | Analysts cannot solicit investment banking business | Prohibited |
| Analyst participates in issuer road show marketing | Analysts cannot market an issuer’s offering | Prohibited |
| Firm promises favorable research to win banking business | Research cannot be used as inducement | Prohibited |
| Subject company reviews rating, price target, or research summary before publication | Issuer factual review is limited | Prohibited |
| Sales/trading pressures debt analyst to change view to help inventory | Trading desk cannot control research | Prohibited |
| Analyst compensation tied to a specific banking transaction | Compensation must not reward deal-specific outcomes | Prohibited |
| Retaliation against analyst for negative research | Analysts must be protected from business-line retaliation | Prohibited |
| Firm trades ahead of unpublished research | Misuse of research information | Prohibited or heavily restricted |
| Analyst account buys pre-IPO shares in a company in the analyst’s covered sector | Personal conflict | Prohibited |
| Analyst trades contrary to current recommendation without approved exception | Personal trading conflict | Usually prohibited |
Notes and examples
Conduct That May Be Permitted With Controls
| Conduct | Required control |
|---|---|
| Legal/compliance reviews draft research | Review should focus on legal, regulatory, disclosure, and conflict issues |
| Non-research personnel review for factual accuracy | Must not influence recommendation, rating, price target, or analysis |
| Subject company reviews limited factual portions | No rating, price target, or research summary; legal/compliance should control process |
| Analyst conducts legitimate due diligence | Must not be used as a pitch or issuer marketing activity |
| Sales/trading provides market color to debt analyst | Must not pressure conclusions or pre-review recommendations |
| Institutional debt research distributed under Rule 2242 framework | Recipient eligibility, notices/consents, and institutional-only controls must be satisfied |
| Analyst personal trading exception for hardship | Requires documented approval and conflict handling |
Equity Research Report Disclosure Checklist
For equity research reports under FINRA Rule 2241, know the recurring disclosure triggers.
| Disclosure item | Trigger | Exam cue |
|---|---|---|
| Analyst or household financial interest | Analyst or household member owns or has a financial interest in subject company securities | “The analyst’s spouse owns shares” |
| Nature of analyst interest | Financial interest exists | Must disclose type/nature, not merely “conflict exists” |
| Firm/affiliate 1% ownership | Firm or affiliates beneficially own 1% or more of a class of common equity of the subject company | Ownership tested as a firm conflict |
| Managed/co-managed offering | Firm or affiliate managed/co-managed a public offering of subject company securities during the relevant lookback period | Underwriting relationship |
| Investment banking compensation received | Firm or affiliate received investment banking compensation from subject company during the relevant lookback period | “Recent fee from issuer” |
| Expected or intended investment banking compensation | Firm or affiliate expects or intends to seek investment banking compensation from subject company | Even prospective business can require disclosure |
| Subject company client relationship | Subject company is or was a client during the relevant period | Must identify type: investment banking, non-investment-banking securities, or non-securities services |
| Analyst compensation from issuer | Analyst received compensation from subject company | Direct issuer payment is a severe conflict |
| Analyst compensation tied to firm banking revenue | Analyst compensation was based on firm investment banking revenues among other factors | Compensation conflict disclosure |
| Market making | Firm makes a market in the subject company’s securities | Firm trading interest |
| Other material conflicts | Known or reasonably known material conflicts | Catch-all; do not ignore obvious facts |
| Ratings system | Firm uses ratings such as buy/hold/sell | Must explain meanings and time horizons |
| Ratings distribution | Firm must show distribution of ratings and investment banking relationships by rating category | Tests whether “buy” ratings are concentrated among banking clients |
| Price target | Report includes a target price | Must disclose valuation methods and risks that could impede target achievement |
| Historical price chart | Required when rating/price-target history conditions are met | Shows price history and dates of rating/target changes |
Debt Research Disclosure and Institutional Treatment
Debt Research Disclosure Themes
| Disclosure theme | What to identify |
|---|---|
| Analyst/household holdings | Financial interests in issuer debt or equity securities |
| Analyst compensation from issuer | Direct issuer compensation to analyst |
| Firm investment banking relationships | Managed/co-managed offerings, received banking compensation, expects or intends to seek banking compensation |
| Non-investment-banking compensation | Other products or services provided to issuer when disclosure is required |
| Client relationship | Whether issuer is or was a firm client and service category |
| Principal trading or market activity | Firm may trade, hold inventory, or act as principal in the debt securities |
| Rating system | Meanings of ratings, time horizon, and distribution information where applicable |
| Other material conflicts | Any known or reasonably knowable conflict affecting objectivity |
Notes and examples
Institutional Debt Research Decision Table
| Recipient / condition | Treatment |
|---|---|
| Retail investor receives debt research | Apply retail debt research protections |
| Eligible institutional investor with required consent/notice | Institutional debt research framework may apply |
| Institutional account but no required consent where needed | Do not assume institutional carveout applies |
| Report redistributed to retail investors | Retail protections become a concern |
| Institutional debt research contains false or misleading statements | No carveout protects fraud or misleading content |
| Institutional recipient asks for full retail protections | Firm must respect recipient status and election |
Regulation AC: Analyst Certification Cheat Sheet
Regulation AC focuses on whether the analyst’s stated views are genuinely the analyst’s own and whether compensation influenced those views.
| Context | Required concept | Exam cue |
|---|---|---|
| Research report | Analyst must certify that views accurately reflect personal views | Applies to recommendations, opinions, and price targets |
| Research report compensation statement | Analyst must certify that compensation was not directly or indirectly related to specific recommendations or views, or disclose if it was | “Bonus for upgrading issuer” is a red flag |
| Public appearance | Firm must maintain required analyst certifications/records for public appearances | Do not confuse oral disclosure with written report certification |
| Multiple analysts | Certifications must cover responsible analysts | Each covered analyst’s view and compensation issue matters |
| Third-party research | Reg AC obligations depend on who prepared and distributed the report | Do not assume member can adopt third-party views without controls |
Notes and examples
Regulation AC Cheat Sheet
Regulation AC is heavily connected to analyst integrity.
What the Analyst Certification Does
A research analyst certification generally addresses:
- The analyst’s views accurately reflect the analyst’s personal views.
- The analyst’s compensation was not, is not, and will not be directly or indirectly related to the specific recommendations or views in the report, unless otherwise disclosed as required.
Exam Traps
| Question wording | Watch for |
|---|---|
| “Analyst is paid more if investment banking wins the issuer’s deal” | Direct conflict; likely prohibited or impermissible compensation structure |
| “Analyst compensation considers overall firm profitability” | Not always prohibited, but must be handled under firm policy and disclosure rules |
| “Analyst certifies a report written by investment banking” | Research content cannot be investment-banking-controlled |
| “No compensation disclosure is needed because recommendation is accurate” | Accuracy does not eliminate disclosure obligations |
Public Appearances
A public appearance is not a research report, but it is not unregulated.
| Analyst says / does | Required exam response |
|---|---|
| Discusses a covered issuer on television | Must disclose material conflicts applicable to the appearance |
| Mentions personal or household ownership | Disclose analyst financial interest when required |
| Discusses issuer that is a firm investment banking client | Conflict disclosure may be required if known or reasonably known |
| Gives a target price orally | Must have reasonable basis; public appearance rules and antifraud standards apply |
| Makes exaggerated guarantee | Violates fair-dealing and antifraud standards regardless of disclosures |
| Appears before report publication | Watch for selective dissemination and trading-ahead concerns |
| Uses MNPI from issuer meeting | Must not trade, recommend, or publish based on MNPI; escalate internally |
Prepublication Review Rules
| Reviewer | Permitted purpose | Not permitted |
|---|---|---|
| Legal/compliance | Legal, regulatory, disclosure, conflict, and supervisory review | Rewriting the analyst’s opinion to support business goals |
| Non-research personnel | Factual accuracy or conflict identification under procedures | Influencing rating, recommendation, price target, or thesis |
| Investment banking | Highly restricted and controlled; generally only factual/conflict review through proper channels | Approval, supervision, pressure, or content control |
| Sales/trading | Limited market/factual input, especially in debt context | Pressure based on inventory, trading positions, or customer flows |
| Subject company | Limited factual review of permitted sections | Review of rating, price target, research summary, or recommendation |
| Senior management | Oversight of controls and risk | Retaliation or commercial pressure |
Personal Trading by Research Analysts
| Rule theme | Practical exam rule |
|---|---|
| Preclearance | Analyst accounts are subject to firm approval and surveillance |
| Covered accounts | Includes accounts with analyst/household financial interest or control |
| Pre-IPO securities | Analyst account generally may not acquire pre-IPO securities of issuers in the analyst’s covered sector |
| Trading against recommendation | Usually prohibited unless documented exception, such as hardship, is approved |
| Blackout periods | Firms must prevent analysts from benefiting from knowledge of unpublished research |
| Disclosure | Analyst/household holdings in subject company securities can require disclosure |
| Indirect evasion | Trading through family or controlled accounts does not avoid the rule |
Notes and examples
Personal Trading by Research Analysts
Personal trading questions are common because they combine conflicts, timing, and supervision.
Core Principles
| Principle | Exam meaning |
|---|---|
| Analyst accounts are restricted | Includes many household or controlled accounts |
| Preapproval is important | Firm procedures typically require prior approval for covered securities |
| Trading ahead of research is a conflict | Especially before publication or rating/target changes |
| Trading contrary to recommendation is problematic | Example: selling while maintaining strong buy, or buying while recommending sell |
| IPO allocations can be restricted | Especially in industries the analyst covers |
| Exceptions are narrow | Hardship or special circumstances require legal/compliance approval |
Personal Trading Trap Table
| Scenario | Likely answer |
|---|---|
| Analyst buys shares before initiating a positive report | Not permitted; trading ahead conflict |
| Analyst sells personal holdings immediately before downgrade | Not permitted; misuse of research timing |
| Analyst household member trades covered issuer without disclosure | Problem; household accounts count |
| Analyst trades through managed account with no control | May be treated differently if rule exception applies |
| Analyst wants to sell for hardship | Escalate and obtain required approval; do not self-approve |
| Firm policy is stricter than FINRA minimum | Follow stricter firm policy |
Regulation FD and MNPI
Regulation FD Basics
| Issue | Rule concept |
|---|---|
| Covered issuer | Applies to public issuers subject to Regulation FD |
| Covered recipients | Securities market professionals and holders likely to trade are key categories |
| Intentional selective disclosure | Issuer must make simultaneous public disclosure |
| Non-intentional selective disclosure | Issuer must make prompt public disclosure |
| Public disclosure methods | Broad, non-exclusionary dissemination such as appropriate SEC filing, press release, or public call/webcast |
| Excluded recipients | Persons owing confidentiality or trust duties, or persons who expressly agree to keep information confidential |
| Analyst response | If analyst receives possible MNPI, stop, do not trade/recommend, and escalate to legal/compliance |
Notes and examples
Insider Trading Decision Points
| Question | If yes | If no |
|---|---|---|
| Is the information material? | Continue MNPI analysis | Trading risk may be lower, but antifraud rules still apply |
| Is it nonpublic? | Do not use until public and absorbed by market | Public information can be analyzed |
| Was it obtained through breach, duty, misappropriation, or improper tip? | Insider trading risk | Continue to check other duties |
| Did the analyst trade, recommend, or tip? | Liability risk increases | Possession alone still requires controls |
| Is the information about a tender offer? | Rule 14e-3 risk can be especially strict | Apply ordinary 10b-5 analysis |
Mosaic Theory
| Permitted | Not permitted |
|---|---|
| Combining public information with immaterial nonpublic information to reach an independent conclusion | Using material nonpublic information received from issuer management |
| Channel checks using lawful methods | Deceptive information gathering |
| Independent analysis that infers a result | Publishing or trading after receiving a selective earnings leak |
| Escalating uncertainty to compliance | Deciding alone that questionable information is “probably fine” |
Regulation FD Cheat Sheet
Regulation FD addresses selective disclosure by issuers.
| Concept | Quick rule |
|---|---|
| Covered persons | Issuers and persons acting on their behalf |
| Covered recipients | Market professionals and certain shareholders likely to trade |
| Intentional selective disclosure | Public disclosure must be simultaneous |
| Non-intentional selective disclosure | Public disclosure must be prompt |
| Analyst implication | Do not solicit or use selective MNPI; escalate if received |
Series 87 questions often frame Regulation FD as a conversation between issuer management and an analyst. If the issuer reveals material nonpublic information, the safe exam response is do not trade, do not publish using it, and escalate.
Securities Offerings and Research
Research can become problematic during securities offerings because written communications may be treated as offers or conditioning the market.
| Rule / concept | What it generally does | Exam trap |
|---|---|---|
| Securities Act gun-jumping rules | Restrict offers before and during registration periods | Research may be viewed as an offer depending on timing/content |
| Rule 137 | Helps nonparticipating broker-dealers publish regular-course research | Not available if the firm is participating in the distribution |
| Rule 138 | Allows certain regular-course research on one class of securities when another class is being offered | Must fit the class-of-security and regular-course conditions |
| Rule 139 | Allows certain regular-course issuer or industry research for qualifying issuers | A special promotional initiation is not regular-course research |
| Emerging growth company research | JOBS Act concepts reduce some offering-related research restrictions | Antifraud, Reg AC, and FINRA conflict rules still apply |
| Road shows | Analyst participation in issuer marketing is restricted | “Just attending” may still be solicitation if used to market the deal |
| Lock-up or quiet-period fact pattern | Apply the rule or settlement stated in the question | Do not import old fixed quiet periods unless the scenario gives them |
Third-Party Research
| Scenario | Required analysis |
|---|---|
| Firm distributes independent third-party research | Must have policies to review source reliability and conflicts; cannot distribute known misleading content |
| Firm distributes non-independent third-party research | Greater review, approval, and disclosure concerns |
| Third party was paid by issuer | Material conflict; disclosure and objectivity concerns |
| Member edits or influences the report | May be treated more like the member’s own research |
| Report lacks required disclosures | Firm should not distribute without addressing deficiencies |
| Report is false, exaggerated, or promissory | Distribution is improper even if third party wrote it |
Notes and examples
Third-Party Research
Third-party research is not a free pass. A member distributing research prepared by another person or firm still has responsibilities.
Key Rules of Thumb
| Situation | Treatment |
|---|---|
| Member distributes third-party research knowing it is false or misleading | Not permitted |
| Research is independent third-party research | May have different review obligations, but distribution still requires reasonable controls |
| Third-party provider has conflicts | Determine whether disclosure is required |
| Member materially alters report | Member may assume greater responsibility |
| Report is redistributed to retail customers | Scrutinize disclosures and suitability of communication |
Candidate Trap
Do not answer “no responsibility because it was third-party.” Distribution creates obligations.
Communications Standards Still Apply
Research rules do not replace general communications and antifraud standards.
| Standard | Application to research analysts |
|---|---|
| Fair and balanced | Discuss material risks, not only upside |
| No false or misleading statements | Disclosures do not cure false claims |
| Reasonable basis | Ratings, recommendations, and targets need support |
| No guarantees | Avoid certain or promissory performance language |
| Balanced presentation of risks and benefits | Especially important with speculative issuers or distressed debt |
| No selective dissemination | Do not give favored clients early access to material research conclusions |
| Proper approval and supervision | Follow firm procedures for report issuance and appearances |
Supervisory and Compliance Controls
| Control | What the exam expects |
|---|---|
| Written supervisory procedures | Identify, manage, and disclose research conflicts |
| Information barriers | Separate research from investment banking and inappropriate trading influence |
| Report approval | Appropriate supervisory review before distribution |
| Conflict database | Track issuer relationships, firm holdings, market making, compensation, and analyst interests |
| Personal trading surveillance | Monitor analyst and household accounts |
| Prepublication review logs | Document who reviewed drafts and why |
| Subject-company review records | Keep evidence of limited factual review and any resulting changes |
| Compensation review | Document analyst compensation basis and exclude deal-specific rewards |
| Public appearance procedures | Require disclosures and maintain required records |
| Training | Analysts, bankers, sales/trading, and supervisors must understand boundaries |
| Escalation process | MNPI, issuer complaints, pressure, and conflicts go to legal/compliance |
| Third-party research procedures | Review provider independence, reliability, and disclosures |
Fast Scenario Drill
| Scenario | Best answer |
|---|---|
| Banker asks analyst to join a pitch to show the firm’s “strong research support” | Do not participate; research cannot be used to solicit banking business |
| Issuer asks to review the draft price target before publication | Refuse; subject company review cannot include target, rating, or research summary |
| Analyst receives nonpublic quarterly results from CFO by mistake | Stop, do not publish/trade/recommend, and escalate to compliance |
| Firm expects to seek investment banking business from subject company in next few months | Disclose expected/intended banking compensation where required |
| Sales desk asks debt analyst to soften negative language because the firm holds inventory | Improper pressure; research view must remain independent |
| Analyst’s household member owns subject company stock | Financial interest disclosure and personal trading analysis required |
| Third-party report is issuer-paid and highly promotional | Do not distribute without addressing misleading content and conflicts; likely improper |
| Institutional client receives debt research after proper institutional consent process | Modified institutional debt research treatment may apply |
| Analyst makes bullish comments on webcast before report release | Check public appearance disclosures and selective dissemination controls |
| Safe harbor might permit research during an offering | Still apply antifraud, Reg AC, and FINRA conflict rules |
High-Yield Traps
- Disclosure is not a cure for false, misleading, or unsupported research.
- Public appearances are not research reports, but conflict disclosures still apply.
- A “factual review” by an issuer cannot include the rating, price target, or research summary.
- Investment banking cannot supervise, approve, or pressure research.
- Debt research allows more institutional and market-color flexibility, but not trading-desk control.
- Institutional debt research treatment depends on recipient eligibility and required consent or notice.
- Third-party research is not a free pass; distribution creates supervisory responsibility.
- Reg FD is an issuer rule, but analysts must still handle MNPI correctly.
- Mosaic theory protects lawful inference, not use of material nonpublic information.
- Safe harbors for offering-related research do not eliminate antifraud liability.
- Analyst compensation may consider broad firm performance, but not specific banking or trading transactions.
- “Known or should have known” conflicts cannot be ignored by avoiding internal information systems.
Notes and examples
Trap 1: Confusing Disclosure With Permission
Some conflicts can be disclosed. Others are prohibited.
| Conflict | Disclosure enough? |
|---|---|
| Analyst owns subject company shares | Disclosure may be required, but trading restrictions still apply |
| Firm acted as underwriter | Disclosure required; quiet-period rules may also apply |
| Investment banking dictates rating | No. Prohibited even if disclosed |
| Analyst uses MNPI | No. Prohibited even if disclosed |
| Promising favorable coverage | No. Prohibited |
Trap 2: Ignoring Who Is Communicating
| Speaker | Exam relevance |
|---|---|
| Research analyst | Subject to research analyst rules, certifications, public appearance disclosures |
| Investment banker | Cannot control research or use analyst to solicit business |
| Sales/trading | Can create pressure and conflict; communications must be controlled |
| Issuer management | Can provide public/factual information but cannot approve opinions |
| Legal/compliance | Gatekeeper for chaperoning, approvals, escalation, records |
Trap 3: Treating All Communications as Research Reports
Not every communication is a research report, but all communications remain subject to antifraud and supervisory rules.
| Communication | Likely classification issue |
|---|---|
| Broad market commentary | May not be issuer-specific research |
| Economic outlook | Usually not a research report if no issuer-specific recommendation |
| Technical trading note | Depends on content and whether it provides issuer-specific analysis |
| Rating change with analysis | More likely research report |
| Internal-only draft | Research rules and supervision still matter, especially if distributed externally later |
Trap 4: Missing Household Accounts
If the analyst’s spouse, dependent child, or household member trades a covered security, the exam may treat it as a research analyst account issue.
Trap 5: Forgetting Public Appearances
Research obligations are not limited to written reports. Analyst statements at conferences, interviews, media segments, and webinars can trigger disclosure and fairness requirements.
Last-Week Review Checklist
- Memorize the difference between equity research under Rule 2241 and debt research under Rule 2242.
- Practice identifying whether a communication is a research report, public appearance, third-party report, or ordinary market commentary.
- Drill equity report disclosures: analyst holdings, firm ownership, banking compensation, issuer client status, market making, ratings distribution, and price-target support.
- Drill debt research scenarios involving institutional investors, principal trading, and sales/trading pressure.
- Know Regulation AC certifications and how compensation conflicts are handled.
- Apply the MNPI sequence: material, nonpublic, duty/breach, use, escalation.
- Separate legitimate issuer factual review from improper content influence.
- Watch for investment banking pitch, road show, and favorable-research promises.
- Review Rules 137, 138, and 139 at a conceptual level for offering-related research.
- Use practice questions to test judgment, not just recall.
Next step: work timed Series 87 practice questions focused on research-report disclosures, analyst independence, MNPI, and public-appearance scenarios until the correct control or disclosure becomes automatic.
Notes and examples
Last-Minute Review Checklist
Before taking Series 87 practice questions, make sure you can answer these quickly:
- What makes a communication a research report?
- Who is a research analyst under the rules?
- What accounts count as analyst accounts?
- What conflicts must be disclosed in research reports?
- What does Regulation AC require?
- When is analyst communication with investment banking prohibited?
- When can a subject company review a draft?
- What are the main personal trading restrictions?
- What is the correct response to MNPI?
- How does Regulation FD affect analyst conversations with issuers?
- What public appearance disclosures apply?
- How does third-party research differ from internally produced research?
- How does institutional debt research differ from retail research?
- What supervisory controls should a firm maintain?
- When does disclosure not cure the problem?
Series 87 Cheat Sheet
The FINRA Series 87 — Research Analyst Qualification Examination (Part II), exam code Series 87, focuses on the regulatory side of research analyst activity: research report content, conflicts of interest, required disclosures, analyst conduct, supervision, public appearances, offering-related restrictions, and information barriers.
Use this page as a rapid review before moving into topic drills, mock exams, and detailed explanations. It is independent companion practice support and is not affiliated with FINRA.
Notes and examples
Practice Strategy for Series 87
Use this Cheat Sheet first, then move into original practice questions that force classification under time pressure.
Recommended practice order:
Definitions drill
Research report, analyst, analyst account, public appearance, third-party research, debt research.Conflict drill
Identify the conflict and decide: prohibited, disclose, supervise, or escalate.Disclosure drill
Practice report disclosure scenarios until you can spot missing items quickly.MNPI and Regulation FD drill
Work issuer-conversation scenarios and expert-network scenarios.Investment banking interaction drill
Focus on pitches, due diligence, factual review, compensation, and pressure.Mixed mock exam
Combine all topics so you practice switching rules quickly.Detailed explanations review
For every missed question, write the rule in one sentence and identify the trap.
High-Yield Exam Mindset
Series 87 questions often test whether you can classify a fact pattern into one of four buckets:
| Bucket | Exam decision | Typical trigger |
|---|---|---|
| Prohibited | Do not do it, even with disclosure | Promising favorable research, analyst soliciting investment banking business, using MNPI |
| Allowed only with controls | Legal/compliance, supervision, information barriers, preapproval | Factual review by subject company, analyst communication with investment banking, personal trading exceptions |
| Allowed with disclosure | Conflict is not automatically banned but must be clearly disclosed | Analyst ownership, firm compensation, market making, rating distribution |
| Outside research rule but still regulated | Not a “research report,” but antifraud and communications rules still apply | Broad market commentary, technical analysis, institutional debt communications |
A common candidate mistake is treating every conflict as automatically prohibited. The exam usually wants the more precise answer: ban, supervise, disclose, or classify as not applicable.
Core Rules and Concepts to Know
Primary Regulatory Themes
| Theme | What to remember |
|---|---|
| FINRA research rules | Designed to manage conflicts between research, investment banking, sales/trading, issuers, and customers |
| Analyst independence | Research opinions must not be controlled by investment banking, issuer pressure, or compensation incentives tied to a specific recommendation |
| Required disclosures | Investors must be able to see material conflicts that could affect objectivity |
| Regulation AC | Analyst certifications about personal views and compensation relationships |
| Regulation FD | Prevents selective disclosure of material nonpublic information by issuers |
| Insider trading rules | MNPI cannot be traded on, tipped, or misused |
| Communications standards | Research must be fair, balanced, not misleading, and properly supervised |
| Supervision | Firms must have written procedures, review processes, records, and escalation paths |
FINRA Research Rule Logic
The Four-Question Decision Path
Before answering a Series 87 fact pattern, ask:
Is this research?
Is it issuer-specific analysis sufficient to support an investment decision?Who is influencing it?
Investment banking, issuer management, sales/trading, proprietary trading, or a customer?What conflict exists?
Ownership, compensation, underwriting role, market making, rating history, personal trading, business relationship, or MNPI?What is the required treatment?
Prohibit, disclose, supervise, preapprove, certify, or keep behind information barriers.
Quick Classification Table
| Fact pattern | Likely exam treatment |
|---|---|
| Investment banking asks analyst to raise a rating to win a mandate | Prohibited |
| Analyst promises CEO favorable coverage if company selects firm as underwriter | Prohibited |
| Analyst owns shares of subject company | Usually disclose and manage; trading restrictions may apply |
| Firm recently managed subject company offering | Disclose; offering-related restrictions may also apply |
| Subject company reviews draft for factual accuracy only | Potentially allowed with legal/compliance controls |
| Subject company reviews rating, price target, or recommendation before publication | Red flag; generally not permitted |
| Analyst learns MNPI from issuer CFO | Do not trade, tip, or publish using MNPI; escalate |
| Research report includes price target | Must include basis, valuation method, and risks |
| Analyst appears on television discussing covered company | Public appearance disclosures apply |
| Distributed third-party research is known to be misleading | Do not distribute |
Research Reports: Content, Disclosures, and Presentation
Required Research Report Discipline
Research reports should be:
- Clear about the recommendation, rating, and meaning of rating terms.
- Balanced in discussing upside and downside.
- Supported by valuation methods, assumptions, and factual bases.
- Transparent about conflicts.
- Supervised under written procedures.
- Consistent with Regulation AC certifications.
- Free from exaggerated, promissory, or misleading statements.
Notes and examples
Research Report Disclosure Matrix
| Disclosure area | What to look for on the exam |
|---|---|
| Analyst financial interest | Analyst or household ownership or other financial interest in subject company |
| Firm ownership | Member or affiliates beneficially owning a significant equity position, where disclosure is required |
| Investment banking relationship | Firm managed/co-managed offerings, received investment banking compensation, or expects/seeks such compensation when required to disclose |
| Analyst compensation | Whether analyst compensation is tied to investment banking revenues or other relevant factors |
| Market making | Firm makes a market in the subject company’s securities, where applicable |
| Rating distribution | Distribution of buy/hold/sell or comparable ratings, often with investment banking relationship percentages |
| Price target | Valuation method, assumptions, time horizon, and risks to achieving the target |
| Other material conflicts | Any known conflict that could reasonably affect objectivity |
| Regulation AC certification | Analyst certifies views accurately reflect personal views and addresses compensation relationship |
Rating and Price Target Traps
| Trap | Correct approach |
|---|---|
| “Buy” means the same thing at every firm | No. The report must explain the firm’s rating system |
| Price target can be stated without support | No. Explain valuation method, assumptions, and risks |
| Only positive reports need risk discussion | No. Balanced presentation is required |
| Disclosure cures false analysis | No. Disclosure does not make misleading research acceptable |
| Boilerplate disclosure is always enough | No. Disclosures must be meaningful and applicable |
Analyst Independence and Investment Banking Conflicts
Prohibited or Highly Restricted Conduct
Research analysts generally must not:
- Solicit investment banking business.
- Participate in investment banking pitches or road shows in a way that promotes a transaction.
- Promise favorable research, a favorable rating, or a favorable price target.
- Let investment banking personnel approve, control, or direct research content.
- Change research to win or retain investment banking business.
- Share unpublished research conclusions improperly.
- Be retaliated against for unfavorable or independent research views.
Notes and examples
Permitted Communications: The Key Distinction
Not every interaction between research and investment banking is banned. The exam tests purpose and controls.
| Communication | Likely treatment |
|---|---|
| Due diligence or factual discussion with legal/compliance involvement | Potentially permitted |
| Investment banking asking for a more favorable rating | Prohibited |
| Analyst explaining industry conditions internally | May be permitted if not used for solicitation or improper influence |
| Investment banking reviewing draft recommendation | Red flag/prohibited |
| Analyst attending pitch to impress issuer | Prohibited |
| Legal/compliance chaperoned factual review | Potentially permitted |
Subject Company Review
A subject company may be allowed to review limited portions of a draft research report for factual accuracy, subject to firm procedures.
High-yield limits:
- Do not provide rating, recommendation, price target, or research summary for issuer approval.
- Do not allow issuer management to influence the analyst’s opinion.
- Legal/compliance review and documentation are usually central.
- Any post-review change to rating or price target is a major red flag and should require heightened review.
Quiet Periods and Offering-Related Research
Offering-related questions test whether research is being used to condition the market or support investment banking.
What to Remember
- Research around public offerings can trigger special restrictions.
- Restrictions may depend on the firm’s role in the offering, the type of offering, issuer status, and current regulatory exceptions.
- FINRA rules include offering-related research limitations and exceptions; firm procedures may be stricter.
- If the question gives a specific quiet period, issuer category, or exception, apply the facts exactly.
Notes and examples
Offering Context Decision Rules
| Fact pattern | Exam instinct |
|---|---|
| Firm is manager or co-manager of offering and publishes favorable research immediately after | Check quiet-period and exception rules |
| Analyst distributes research to help investment banking win mandate | Prohibited |
| Research is ordinary-course, not linked to solicitation, and exception applies | May be permitted |
| Issuer is identified as an emerging growth company | Check special treatment; do not apply generic rule blindly |
| Significant news occurs during a restricted period | Look for exception allowing factual or responsive coverage |
MNPI, Insider Trading, and Information Barriers
MNPI Definition
Information is material if a reasonable investor would consider it important. It is nonpublic if it has not been broadly disseminated and absorbed by the market.
Typical MNPI Examples
- Unannounced earnings results.
- Pending merger or acquisition.
- Major regulatory approval or rejection.
- Significant financing or liquidity event.
- Unannounced analyst-relevant guidance from issuer management.
- Major customer loss, cybersecurity event, or restructuring not yet public.
Notes and examples
What the Analyst Must Do
| If analyst receives… | Correct action |
|---|---|
| Public information | May analyze and publish, subject to standards |
| Rumor | Verify, label carefully, avoid misleading certainty |
| MNPI | Stop, do not trade or tip, escalate to legal/compliance |
| Selective disclosure from issuer | Treat as potential Regulation FD/MNPI issue |
| Information from expert network or consultant | Evaluate source, confidentiality duty, and MNPI risk |
Common MNPI Traps
| Trap | Why wrong |
|---|---|
| “The analyst did not trade, only changed rating” | Publishing based on MNPI can still be improper |
| “The information came from a friend, not the issuer” | Misappropriation and tipping rules may still apply |
| “Only institutional clients received it” | Selective disclosure concerns remain |
| “The market suspected it already” | Rumor does not automatically make information public |
| “Compliance can be told after publication” | Escalation must occur before use |
Communications With the Public
Research is also a communication with investors. It must be fair, balanced, and not misleading.
Communication Standards
| Standard | Research application |
|---|---|
| Fair and balanced | Present risks, not only upside |
| No exaggerated claims | Avoid guaranteed returns or unsupported price targets |
| Clear basis | Explain valuation, assumptions, and data sources |
| No cherry-picking | Do not present only favorable facts |
| Appropriate supervision | Follow firm review and approval procedures |
| Proper audience | Institutional and retail communications may have different treatment, but antifraud rules always apply |
Public Appearance Checklist
When an analyst makes a public appearance about a subject company, consider:
- Does the analyst or household have a financial interest?
- Does the firm have relevant investment banking or compensation conflicts?
- Does the firm make a market in the security?
- Are ratings or price targets discussed?
- Are statements balanced and not misleading?
- Are required records and certifications maintained?
- Is any MNPI being hinted at or disclosed?
Supervision and Written Procedures
Series 87 is not only about analyst behavior; it is also about firm systems.
Supervisory Controls to Recognize
| Control | Purpose |
|---|---|
| Written supervisory procedures | Define how research is prepared, reviewed, approved, and distributed |
| Information barriers | Prevent MNPI misuse and improper influence |
| Legal/compliance review | Manage conflicts, offering restrictions, and draft review |
| Personal trading surveillance | Detect trading ahead, contrary trading, and household account issues |
| Disclosure controls | Ensure required report and public appearance disclosures are included |
| Compensation review | Prevent investment banking from controlling analyst pay |
| Recordkeeping | Preserve approvals, certifications, communications, and research history |
| Training | Ensure analysts understand rules and escalation duties |
Notes and examples
Escalation Triggers
An analyst should escalate when:
- Receiving possible MNPI.
- Facing pressure from investment banking, issuer management, sales/trading, or large customers.
- Considering a personal trade in a covered issuer.
- Changing a rating or price target after issuer or banker contact.
- Preparing research near an offering.
- Discovering a missing or inaccurate disclosure.
- Learning third-party research may be false or conflicted.
Quick “Prohibited vs. Permitted” Review
Generally Prohibited
- Analyst solicits investment banking business.
- Analyst promises favorable coverage.
- Investment banking approves or controls research content.
- Issuer management approves recommendation or price target.
- Analyst trades ahead of publication or rating change.
- Analyst trades contrary to recommendation without proper exception.
- Research is based on MNPI.
- Report omits material conflicts.
- Firm distributes research it knows is false or misleading.
- Retaliation against analyst for unfavorable research.
Notes and examples
Potentially Permitted With Controls
- Analyst participates in factual due diligence.
- Research and investment banking communicate through legal/compliance.
- Subject company reviews factual portions of draft.
- Analyst personal trade under narrow exception with approval.
- Distribution of third-party research after required review.
- Institutional debt research under applicable conditions.
- Research during offering-related periods if an exception applies.
Usually Requires Disclosure
- Analyst or household financial interest.
- Firm or affiliate ownership interest requiring disclosure.
- Investment banking compensation or relationship.
- Firm market making.
- Analyst compensation conflict.
- Rating distribution.
- Price target methodology and risks.
- Other known material conflicts.
Scenario-Based Decision Rules
If the Question Involves an Issuer Draft Review
Ask:
- Was legal/compliance involved?
- Was the review limited to factual accuracy?
- Were rating, recommendation, price target, or summary withheld?
- Did the issuer request changes to opinion?
- Was any post-review change documented and approved?
If the issuer influences opinion, the answer is likely prohibition or escalation.
If the Question Involves Investment Banking
- Is the analyst helping win business?
- Is investment banking pressuring content?
- Is compensation tied to a specific transaction or recommendation?
- Is legal/compliance chaperoning factual discussions?
- Is the communication part of due diligence or solicitation?
If the purpose is solicitation or influence, choose the restrictive answer.
If the Question Involves Analyst Trading
- Is it a covered subject company?
- Is the account controlled by or beneficially tied to the analyst or household?
- Is there a pending report, rating change, or price target change?
- Is the trade consistent with the current recommendation?
- Was preapproval obtained?
- Is an exception clearly available?
If facts are ambiguous, the safer exam answer is escalation/preapproval, not trade first.
If the Question Involves MNPI
- Is the information material?
- Is it public?
- Was it received under a duty or from a questionable source?
- Has legal/compliance cleared its use?
- Is anyone trading, tipping, publishing, or selectively sharing it?
If material and nonpublic, stop and escalate.
Mini Review Tables
Conflict Source Table
| Conflict source | Example |
|---|---|
| Analyst personal | Analyst owns issuer shares |
| Household | Spouse trades subject company |
| Firm investment banking | Firm managed issuer offering |
| Firm trading | Firm makes market or holds position |
| Issuer pressure | CEO threatens access cutoff |
| Customer pressure | Large client wants favorable research |
| Compensation | Pay linked to banking revenue |
| Information | Analyst receives MNPI |
Correct Response Table
| Problem | Best response |
|---|---|
| Missing disclosure | Correct before publication |
| MNPI received | Escalate to legal/compliance |
| Banker pressure | Refuse and report through firm process |
| Issuer wants rating changed | Do not change due to pressure; escalate |
| Personal trade request | Seek preapproval; apply restrictions |
| Third-party report questionable | Do not distribute until reviewed |
| Public appearance conflict | Make required disclosures |
| Offering-period research | Check restrictions and exceptions |