Series 87 — Research Analyst Qualification Examination (Part II) Quick Review
Quick Review for the FINRA Series 87 — Research Analyst Qualification Examination (Part II), focused on research rules, conflicts, disclosures, supervision, MNPI, and practice priorities.
Series 87 Quick Review
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.
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 |
Fast Definition Review
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 |
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.
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 |
Regulation AC Quick Review
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 |
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.
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.
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 |
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.
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.
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 |
Regulation FD Quick Review
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.
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?
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.
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.
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 |
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.
Common Series 87 Traps
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.
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.
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
Ask:
- 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
Ask:
- 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
Ask:
- 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 |
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?
Practice Strategy for Series 87
Use this Quick Review 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.
Practical Next Step
After reviewing this page, move directly into a Series 87 question bank with topic drills on research disclosures, analyst independence, MNPI, public appearances, personal trading, third-party research, and debt research. Use the detailed explanations to turn each missed question into a short rule you can recognize on exam day.