Exam Identity and Study Use
This Quick Reference supports independent preparation for the FINRA Series 87 — Research Analyst Qualification Examination (Part II), official exam code Series 87. The exam is rule-heavy: expect applied scenarios about research reports, analyst conflicts, disclosures, public appearances, material nonpublic information, offering restrictions, and supervisory controls.
| 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 |
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 |
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 |
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 |
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 Quick Reference
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 |
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 |
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 |
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” |
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 |
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.
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.