Series 87: Research Dissemination

Series 87 Research Dissemination questions help you isolate one part of the FINRA outline before returning to a mixed practice test. The questions below are original Securities Prep practice items aligned to this topic and are not copied from any exam sponsor.

Topic snapshot

Sample questions

Question 1

A research analyst receives an unsolicited text from an unknown number: “ABCD will be added to the S&P 500 after the close—buy now.” The analyst is asked by a salesperson to “blast this to clients.”

Exhibit (price and volatility):

• Prior close: $40.00
• Last trade at 1:30 p.m.: $46.00
• ABCD 60-day average 30-minute absolute move: 0.7%

Firm policy: If an unverified third-party rumor is accompanied by a price move of more than 10× the 60-day average 30-minute move, the analyst must treat it as a potential manipulation attempt.

Based on the exhibit, what is the most appropriate action by the analyst?

• A. Call a few key clients to see if they have heard the rumor
• B. Send a brief research flash after confirming only the price move
• C. Do not disseminate; immediately escalate to compliance/supervision and document the rumor
• D. Forward the rumor with an “unconfirmed” label because the move is under 10×

Best answer: C

Explanation: The stock moved 15% in 30 minutes, about 21× the 0.7% average, triggering the firm’s manipulation-escalation policy.

The 30-minute move is \((46.00-40.00)/40.00=15\%\), which is roughly \(15\%/0.7\%\approx21\times\) the normal 30-minute move. Under the firm’s stated policy, that combination of an unverified rumor and an extreme, abnormal move is a red flag for potential manipulation. The appropriate response is to stop dissemination and escalate with documentation.

A key rumor-manipulation red flag is an unverified “market talk” message (unknown source, urgency, trading prompt) that coincides with an unusually large price move relative to the security’s typical intraday movement. Here, the analyst should quantify whether the move is abnormal under the firm’s policy:

• 30-minute move: \((46-40)/40 = 15\%\)
• Multiple of typical move: \(15\%/0.7\% \approx 21\times\)

Because the move is greater than 10× the 60-day average 30-minute move, the policy requires treating it as a potential manipulation attempt: do not circulate the rumor, promptly notify compliance/supervision, and create a record (e.g., rumor log and related communications) so the firm can monitor trading and apply controls (such as restrictions) as appropriate. The key takeaway is that abnormal price action plus an unverified rumor warrants escalation, not distribution.

• “Unconfirmed” still spreads it and fails the policy trigger based on the abnormal-move multiple.
• Price-only “confirmation” does not verify the information source and would still be rumor-based dissemination.
• Selective client calls risks further circulating the rumor and uneven dissemination while the matter should be escalated and documented.

Question 2

A research analyst’s updated report (rating change and new price target) has already received the firm’s required supervisory approval and includes all required disclosures. She wants to alert clients and internal salespeople quickly using common channels.

Which distribution method is NOT appropriate because it creates the highest supervision and record-retention risk?

• A. Texting the change from her personal phone on a consumer app and deleting the thread
• B. Sending a brief alert on a firm-approved, captured IM platform to the sales desk
• C. Sending the alert through the firm’s archived email system to entitled clients
• D. Posting the approved report to the firm’s client website/portal per firm procedures

Best answer: A

Explanation: Using an unapproved personal messaging channel that is not archived (and deleting messages) undermines required supervision and record retention.

Research-related communications must generally occur only through firm-approved channels that can be supervised and retained. Personal texting or consumer messaging apps typically are not captured by the firm and create significant books-and-records and supervision failures, especially if messages are deleted. Approved, archived email/IM and controlled website posting are commonly acceptable dissemination methods.

The core risk across dissemination channels is whether the communication is on a firm-approved platform that can be supervised and retained as a business record. Research “alerts” (even if they only summarize an already-approved report) are still research-related communications and are typically subject to the firm’s retention, surveillance, and content standards.

Using a personal phone and a consumer messaging app—especially with message deletion—creates a high risk that the firm cannot capture, review, or produce the communication. In contrast, distributing through firm email, firm-captured IM, and a controlled firm website/portal generally supports required supervision, retention, and consistent dissemination of the approved research.

A good rule of thumb is: if the channel is not approved and archived, do not use it for research distribution.

• Personal off-channel texting is problematic because it is typically not captured/supervised and deleting messages defeats retention.
• Archived firm email is generally acceptable because it is retainable and supervised under firm controls.
• Firm website/portal posting is generally acceptable when it follows approval and controlled access procedures.
• Firm-approved captured IM is generally acceptable because it can be retained and reviewed like other business communications.

Question 3

A research analyst’s report changing ABC Corp from Hold to Buy (price target $45) has completed supervisory review, conflict checks, and the analyst’s certification, and is ready to be distributed. Sales asks the analyst to “just text the highlights” to a list of institutional clients. The analyst plans to use a personal WhatsApp account, which is not on the firm’s archived communications platform.

What is the best next step before sending the message?

• A. Use a firm-approved IM/text channel that is captured and retained
• B. Text from a personal phone and forward the thread to compliance
• C. Post the highlights on social media and retain only the report
• D. Send via personal WhatsApp and save screenshots to the file

Best answer: A

Explanation: Research-related IM/text dissemination must occur only through a firm system that archives and retains the message.

Even when a research report is fully approved, distributing research content by IM/text is still a business communication that must be captured and retained under the firm’s recordkeeping controls. If the analyst’s chosen app is not on an approved archiving platform, the message should not be sent that way. The proper next step is to use an approved, supervised, archived channel (or an approved alternative) for dissemination.

The core issue is recordkeeping for research dissemination over IM/text. Research “highlights” sent by text or messaging apps are part of the research communication and must be sent only through channels the firm can supervise, capture, and retain. When an analyst proposes using an unapproved app (such as a personal WhatsApp account that is not archived), the correct workflow step is to stop and move the dissemination to an approved, archived platform (or another approved method like firm email/CRM messaging that is retained).

After-the-fact workarounds (screenshots, forwarding threads, or asking others to preserve/delete messages) generally do not satisfy a firm’s capture-and-retain controls and create gaps in the required audit trail. The key takeaway is that approval of the research content does not override the requirement to use an archivable channel for dissemination.

• Screenshots as records are unreliable and typically don’t meet firm capture/retention controls.
• Forwarding to compliance later still results in an unarchived original communication.
• Social media posting is a separate, higher-risk channel and doesn’t solve IM/text retention; retaining only the report misses the message record.

Question 4

In the context of disseminating equity research, an “embargo” on a research report most accurately means which of the following?

• A. The issuer is prohibited from speaking with the analyst until after publication
• B. Sales may discuss the report’s conclusions internally, but not send it to clients
• C. The report is withheld from all channels until a set release time, with controls to prevent early distribution
• D. The security must be placed on the firm’s restricted list until after publication

Best answer: C

Explanation: An embargo is a time-based hold requiring coordinated, simultaneous release across dissemination channels to avoid premature or uneven distribution.

An embargo is a controlled “hold” on a research report until a specified time. The key control is preventing any channel (email, website posting, sales distribution, or third-party platform) from receiving the report early, which helps avoid premature or uneven dissemination.

Managing embargoed research is primarily a dissemination-control process: the report (or its substantive content) should not be released to any audience or channel before the stated release time. Firms typically coordinate scheduling across all outbound paths (e.g., client email blasts, website/vendor posting, and sales distribution) and limit internal access on a need-to-know basis to reduce the risk of leakage. The objective is an orderly, consistent release that avoids early access by select clients or channels and prevents the appearance of selective dissemination. An embargo is different from trading or coverage restrictions like restricted lists or issuer communication limits.

• Issuer communication ban confuses an embargo with rules governing issuer/analyst interactions.
• Restricted list is a separate control tied to conflicts/material nonpublic information, not a timed release schedule.
• Internal pre-briefing still risks leakage and uneven dissemination if sales is given substantive content before the release time.

Question 5

A broker-dealer is a co-manager on ABC Corp.’s registered follow-on offering. The registration statement has been filed, and the offering is expected to price next week (waiting period). A research analyst drafts a “flash note” to be emailed to all firm clients and posted to the firm’s public website stating: “ABC is a Strong Buy; we expect shares to trade up immediately after pricing—investors should participate in the deal.” The communication does not include or link to the preliminary prospectus and has not been reviewed by legal.

Which is the primary compliance red flag?

• A. It could be viewed as an impermissible written offer not accompanied by a required prospectus
• B. It is primarily a rumor-circulation risk because it predicts short-term price movement
• C. It is primarily a conflict-of-interest issue because the firm is in the underwriting syndicate
• D. It creates selective disclosure because only certain clients receive the information

Best answer: A

Explanation: During an offering, a written research communication that conditions the market can be treated as an offer requiring prospectus-related controls under Securities Act Section 5.

During a registered offering’s waiting period, written communications that could be viewed as offers must comply with Securities Act Section 5 prospectus delivery/conditioning-the-market restrictions. The analyst’s promotional “participate in the deal” language and public posting increase the risk the note is treated as an offer made outside required prospectus-related controls.

Securities Act Section 5 is designed to ensure that offers and sales of registered securities occur with the required prospectus information and within permitted communication channels. During the waiting period, a research note that promotes the offering or encourages participation can be viewed as a written offer that “conditions the market.” If it is an offer, it generally must be accompanied or preceded by the appropriate prospectus (or handled under a permitted framework such as a compliant free writing prospectus), with legal/compliance controls.

Here, the note explicitly urges investors to “participate in the deal,” is intended for broad dissemination (including a public website), and is not accompanied by the preliminary prospectus or legal review—making Section 5/gun-jumping the central red flag rather than a general research-sales practice issue.

• Selective disclosure is less on-point because the note is intended for broad distribution and public posting.
• Underwriting conflict exists, but it is typically addressed through required disclosures and controls; it is not the main Section 5 problem described.
• Rumor/price talk can be problematic, but the key risk here is using written promotional language during an offering without prospectus-related controls.

Question 6

When a research analyst presents an equity recommendation to a hedge fund or money manager audience and discusses bull/base/bear scenarios, which statement is most accurate?

• A. To avoid compliance issues, the analyst should avoid discussing scenarios and limit remarks to repeating the rating and price target.
• B. The analyst should present scenarios as non-guaranteed outcomes and explain key assumptions and material downside risks so the discussion is balanced and not misleading.
• C. The analyst may share a more optimistic scenario orally even if it is inconsistent with the firm’s published research, as long as it is labeled a “hypothetical.”
• D. Because the audience is sophisticated, the analyst may focus on upside scenarios and omit material risk discussion.

Best answer: B

Explanation: Scenario discussions must be fair and balanced, with material assumptions and risks clearly framed and not presented as guarantees.

Presentations to institutional audiences must still be fair, balanced, and not misleading. When discussing scenarios, an analyst should clearly describe assumptions, probability/uncertainty, and material risks—especially downside risks—and avoid language that implies guaranteed outcomes.

The core compliance consideration in hedge fund or money manager meetings is that “sophisticated audience” does not permit selective or promotional framing. Scenario analysis (e.g., bull/base/bear) is generally appropriate, but it must be communicated as uncertain outcomes, supported by reasonable assumptions, and accompanied by a balanced discussion of material risks and sensitivities.

Practically, a compliant scenario discussion:

• Identifies key drivers/assumptions (what must be true)
• Highlights material downside risks and what would invalidate the thesis
• Avoids promissory language (no “can’t miss,” “guaranteed,” or certainty)
• Stays consistent with the firm’s research view so the communication is not misleading

The key takeaway is that risk framing and scenario discussion must remain fair and balanced, even with institutional clients.

• Omitting risks is impermissible because sophistication of the audience does not cure an unbalanced or misleading presentation.
• Inconsistent “hypotheticals” can still mislead if they contradict the firm’s research view or imply unsupported certainty.
• Refusing to discuss scenarios is not required; scenarios are allowed when presented with appropriate uncertainty, assumptions, and risks.

Question 7

A broker-dealer is about to disseminate a time-sensitive research report update. Firm policy requires retaining (1) the final, disseminated version, (2) evidence of supervisory approval, and (3) evidence of when and to whom it was distributed, all in the firm’s approved recordkeeping system.

Two dissemination controls are proposed:

• Control 1: Distribute through a firm-approved research portal that releases the report only after supervisory sign-off and automatically archives the approved file, approval timestamp, and client access/download logs.
• Control 2: Email the PDF from the analyst’s mailbox to clients and have the analyst save a copy of the “sent” email and later write a memo describing the distribution.

Which choice best matches the control that most appropriately meets the recordkeeping objective described?

• A. Control 2, because the analyst’s sent email and memo are sufficient evidence
• B. Either control, as long as a final PDF is stored on the shared drive
• C. Control 2, because email is a written communication and therefore self-recording
• D. Control 1, because it creates an auditable archive of approval and dissemination

Best answer: D

Explanation: It retains the approved version plus timestamped evidence of approval and client distribution in the firm’s recordkeeping system.

Control 1 best satisfies the requirement to document and retain evidence of both approvals and dissemination. It builds an automated, centralized audit trail tying the final disseminated version to supervisory sign-off and to timestamped client distribution records in the firm’s approved retention system.

For research dissemination, firms should be able to evidence (and retain) what was approved, that it was approved before release, and how/when it was distributed. A firm-controlled platform that gates release on approval and automatically captures the final version, approval metadata, and distribution/access logs creates a reliable, searchable audit trail that can be retained under the firm’s recordkeeping program.

By contrast, relying on an individual analyst’s mailbox artifacts and after-the-fact memos is weaker because it is not a controlled, system-generated record of complete dissemination (for example, it may not reliably capture all recipients, timing, or the exact version released) and may not be integrated with the firm’s supervisory approval evidence. The key takeaway is to retain system-based records that link approval to the actual dissemination event.

• Analyst memo as proof is weak because it is after-the-fact and not a system-generated dissemination record.
• Email is self-recording is tempting, but mailbox items alone may not reliably evidence full distribution and approval linkage.
• Saving only the PDF misses the required evidence of supervisory approval and distribution timing/recipients.

Question 8

A research analyst is preparing for an in-person meeting with a buy-side portfolio manager.

Exhibit: Email from portfolio manager

Can you walk me through the key assumptions driving your price target,
what has to happen for the bull case, and the next 2–3 catalysts that
could change your thesis (positive or negative)?

Which preparation is most consistent with what the portfolio manager is requesting and typical buy-side expectations for a research discussion?

• A. Commit to upgrading the stock if a catalyst occurs
• B. Be ready to explain key assumptions and catalysts that move valuation
• C. Focus primarily on rating definitions and standard disclosures
• D. Avoid discussing assumptions and stick to the recommendation

Best answer: B

Explanation: Buy-side clients typically expect depth on the model’s key drivers and the catalysts that could change the investment thesis.

The email asks for a “walk-through” of the price target’s key assumptions, what must occur for an upside scenario, and specific near-term catalysts that could change the thesis. In buy-side meetings, analysts are generally expected to provide deeper driver-level discussion, scenario framing, and catalyst/risk identification rather than a high-level summary.

When presenting to buy-side analysts or portfolio managers, discussions typically go beyond the headline rating and price target. The exhibit requests the building blocks of the analyst’s view: key valuation/model assumptions, what conditions would support an upside (bull) scenario, and identifiable catalysts (events or data points) that could change the thesis in either direction. Preparation should therefore center on explaining the main drivers behind the price target, the sensitivity of conclusions to those drivers at a high level, and a clear catalyst and risk framework. Boilerplate items (e.g., rating definitions or disclosures) are important in a report, but they do not address the PM’s stated purpose for the meeting.

Key takeaway: match the depth and content to the buy-side client’s focus on assumptions, scenarios, and catalysts.

• Boilerplate focus doesn’t answer the PM’s explicit request for drivers and catalysts.
• Headline-only discussion fails to provide the assumptions underlying the price target.
• Promising a rating change goes beyond supported analysis and is not an appropriate commitment.

Question 9

An equity research analyst receives the following internal IM from a trading desk while the firm is a market maker in the stock. The analyst has not independently verified the information and has no attributable source.

Exhibit: Internal IM

Trader (10:12 a.m.): Hearing XYZ will be taken private at $45—stock is moving. Can you blast this to clients / post it?

Which response best aligns with fair and balanced research dissemination standards and helps reduce manipulation risk?

• A. Send the rumor to select clients as time-sensitive market color
• B. Escalate and verify; do not disseminate until confirmed
• C. Issue a flash note citing “street sources” as the basis
• D. Post it on social media with an “unconfirmed” disclaimer

Best answer: B

Explanation: With no verified, attributable basis, the analyst should not circulate the rumor and should escalate for review and independent confirmation before any external communication.

Unverified takeover rumors can be used to move a stock and create manipulation risk, especially when circulated by a firm making a market. The most durable control is to stop dissemination, escalate internally, and require independent confirmation and a clear, supportable basis before any client or public communication.

A core research standard is that communications must be fair, balanced, and not misleading, including having a reasonable, supportable basis for material statements. Passing along an unverified takeover rumor—particularly when the firm is a market maker—can mislead clients, contribute to artificial price movement, and create the appearance of touting.

A prudent approach is to:

• Pause external dissemination of the rumor
• Escalate to supervisory/compliance channels for guidance and documentation
• Seek independent, attributable confirmation before publishing anything
• If a communication is later made, clearly describe the basis/limits and include appropriate conflict disclosures

Labeling something “unconfirmed” does not, by itself, make broad dissemination appropriate when the analyst lacks a reasonable basis.

• Selective “market color” can still be deceptive and creates uneven dissemination of a potentially false catalyst.
• Social media disclaimer still spreads an unverified catalyst broadly and can amplify price impact.
• Vague sourcing (“street sources”) does not establish a reasonable basis or transparency about support.

Question 10

A broker-dealer is participating in a foreign issuer’s equity offering that is intended to be conducted offshore in reliance on Regulation S concepts (no U.S. offers or sales). The research department posts a favorable “deal overview” on the firm’s public website and emails it to a “Global Clients” distribution list.

Due to a control failure, the website page is not geo-blocked, the email list includes U.S.-based clients, and the piece does not include any legend limiting distribution to non-U.S. persons.

What is the most likely outcome of this omission?

• A. No issue exists because research is not treated as an offer in an offering context
• B. The issue is limited to recordkeeping because the content was accurate and not misleading
• C. The only required fix is to add a non-U.S. legend on future versions; prior distribution is unaffected
• D. The communication may be viewed as U.S.-directed selling efforts, creating regulatory exposure and requiring immediate pullback and escalation

Best answer: D

Explanation: Unrestricted web posting and distribution to U.S. clients can be treated as directed selling efforts, undermining the offshore-only communications premise.

When an offering is intended to be offshore-only, broadly accessible web content and emails that reach U.S. clients can be viewed as communications directed into the U.S. This can create regulatory exposure by calling into question whether the communications were consistent with Regulation S concepts. The likely consequence is to stop dissemination, correct controls, and escalate to compliance/legal.

Regulation S concepts focus on keeping the offer and sale (and related selling efforts) outside the U.S. If an offering-related communication is made available without effective controls—such as no geo-blocking for web content, no distribution screening, and no non-U.S. legend—it may be viewed as “directed selling efforts” into the U.S.

In this scenario, the omission is not just a formatting problem; it is a distribution/control failure that can:

• trigger immediate removal/cessation of the communication
• require escalation to compliance/legal and potential remedial steps (e.g., correcting distribution lists, adding access controls/legends)
• create regulatory exposure because the communication reached U.S. audiences during an offshore-only offering

Accuracy of the content and ordinary recordkeeping do not cure a distribution that effectively targets (or reaches) U.S. persons.

• “Research isn’t an offer” is wrong because offering-related communications can still be treated as selling efforts depending on distribution and context.
• “Fix it going forward only” is wrong because the problematic distribution already occurred and must be addressed and escalated.
• “Only recordkeeping” is wrong because the primary risk is improper U.S.-directed distribution, not merely retention.

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