Series 87 — Research Analyst Qualification Examination (Part II) Scenario Practice Guide

The Series 87, administered by FINRA, focuses on the regulatory, supervisory, disclosure, and best-practice responsibilities connected with research analysts and research reports. Scenario questions often require more than recognizing a familiar term. You need to decide who is acting, what communication or activity is involved, what conflict or control applies, and what the most compliant next action should be.

Use this guide to build a repeatable process for reading Series 87 scenarios slowly and choosing the most defensible answer from the facts provided.

Start with the role, not the topic

A Series 87 scenario may mention an analyst, a supervisor, an investment banking employee, sales personnel, a subject company, a public investor audience, or an institutional client. Before thinking about the rule topic, identify the role of each person or department.

Ask:

• Who is the research analyst?
• Who is supervising or approving the activity?
• Is investment banking, sales, trading, legal, compliance, or management involved?
• Is the subject company involved?
• Is the communication directed to the public, a client, an internal audience, or a specific department?
• Is the firm acting as a broker-dealer, underwriter, market participant, employer, or publisher of research?

This matters because the same fact can mean different things depending on the actor. A subject company reviewing factual information is different from a business unit pressuring an analyst to change a rating. A legal or compliance review is different from an investment banking review. A research analyst’s public appearance is different from a private internal discussion.

Role clues to mark immediately

When you read the scenario, underline or mentally tag words such as:

• Research analyst
• Supervisory analyst or principal
• Legal or compliance
• Investment banking
• Sales or trading
• Subject company
• Issuer management
• Customer or investor
• Institutional account
• Public appearance
• Research report
• Prepublication review
• Rating, price target, recommendation, or earnings estimate

Do not jump to the first familiar phrase. A question about a “recommendation” may be testing disclosure, independence, supervision, communications standards, or conflicts.

Find the actual decision point

After identifying the roles, locate the action the question is asking you to judge. Series 87 scenarios often include background facts before presenting the real decision.

Look for the command in the question stem:

• “What should the analyst do?”
• “Which action is most appropriate?”
• “Which disclosure is required?”
• “Which statement best describes the firm’s obligation?”
• “Who may review the report?”
• “What is the best response by the supervisor?”
• “Which fact is most relevant?”
• “Which conduct is prohibited, restricted, or permissible?”

Then restate the question in plain language.

For example:

• “Is this communication a research report, public appearance, or something else?”
• “Is the problem the content of the report, the review process, or the missing disclosure?”
• “Is the firm trying to manage a conflict, document approval, or prevent improper influence?”
• “Is the best next action to disclose, escalate, supervise, restrict, revise, or decline?”

The exam answer should fit the decision point, not merely sound true.

Classify the communication

Many Series 87 scenarios turn on the type of communication. Before evaluating the answer choices, decide what kind of communication is being described.

Common categories include:

• A written research report
• A research update or change in recommendation
• A public appearance by a research analyst
• An internal draft or prepublication communication
• A client or investor communication
• A communication involving the subject company
• A communication involving investment banking, sales, or trading
• A supervisory, legal, or compliance review

Once you classify the communication, ask what controls usually follow:

• Does it need review or approval?
• Does it require clear and prominent disclosure?
• Is the audience entitled to receive the communication?
• Is the communication fair, balanced, and not misleading?
• Is there a conflict that must be disclosed or managed?
• Is the communication independent of improper business influence?
• Is there documentation the firm should maintain?

Separate decisive facts from background facts

Scenario questions often include facts that create context but do not drive the answer. Your job is to separate facts that change the compliance analysis from facts that merely describe the situation.

Facts that often matter

In Series 87 scenarios, pay special attention to:

• Who prepared the research
• Who reviewed or influenced the research
• Whether the communication is public, written, oral, internal, or client-specific
• Whether the communication includes a rating, price target, recommendation, or earnings estimate
• Whether the analyst or firm has a conflict of interest
• Whether there is an investment banking relationship or expected business relationship
• Whether the subject company is being given access to the report or draft
• Whether the purpose of review is factual verification, compliance review, or business influence
• Whether the analyst has a personal financial interest or compensation-related conflict
• Whether the firm’s policies, procedures, and supervision are implicated
• Whether disclosures are omitted, incomplete, unclear, or not made at the right time
• Whether the facts suggest material nonpublic information or improper selective disclosure
• Whether the answer requires escalation to a supervisor, legal, or compliance

Facts that may be less important

Some facts may be included to make the scenario feel realistic but may not determine the answer:

• The analyst’s seniority, unless authority or supervision is at issue
• The client’s size, unless the audience or account type matters
• The popularity of the stock, unless risk or communication fairness is at issue
• The analyst’s confidence in the recommendation, unless the question concerns reasonable basis or misleading statements
• Market movement after the report, unless timing or disclosure is relevant
• A business unit’s preference, unless it affects independence or conflicts

Do not ignore these facts, but do not let them distract you from the regulatory decision.

Use a decision sequence for Series 87 scenarios

A consistent sequence prevents you from choosing an answer too early.

Step 1: Identify the activity

Ask: What is happening?

Examples:

• A report is being drafted.
• A rating is being changed.
• An analyst is appearing on television or a webinar.
• A subject company wants to review a draft.
• Investment banking wants changes made.
• A supervisor is reviewing a report.
• A conflict needs to be disclosed.
• A personal trading or compensation issue is described.

Step 2: Identify the audience

Ask: Who will receive or hear the communication?

The answer may change depending on whether the communication is:

• Public
• Distributed to customers
• Limited to institutional investors
• Internal to the firm
• Sent to the subject company
• Shared with a business unit before publication
• Delivered in a public appearance

A statement made publicly may require a different approach than a statement made in a draft review process.

Step 3: Identify the conflict or control

Ask: What risk is the rule trying to control?

Common Series 87 control themes include:

• Research independence
• Improper influence by investment banking or other business interests
• Fair and balanced communications
• Required disclosures
• Supervisory approval
• Reasonable basis for research opinions
• Handling of material nonpublic information
• Personal trading restrictions or conflicts
• Documentation of review and approval
• Separation of research from business pressure

Step 4: Identify the required action

Ask: What must happen before the activity can proceed?

Possible actions include:

• Add or correct disclosures
• Route the matter to a supervisor, legal, or compliance
• Refuse improper influence
• Limit review to permitted purposes
• Revise misleading language
• Document approval or review
• Delay or stop distribution
• Escalate a conflict
• Apply firm policies and procedures
• Ensure the communication is fair, balanced, and supportable

Step 5: Choose the answer that satisfies the full scenario

A strong answer should match all major facts, not just one keyword. The best choice is usually the one that:

• Preserves research independence
• Addresses conflicts directly
• Provides required disclosure where appropriate
• Uses proper supervision and approval
• Avoids misleading communications
• Respects limits on review, influence, and distribution
• Takes a compliant next step before acting

Read disclosures as part of the answer, not as an afterthought

Disclosure issues are central to research analyst regulation. When a scenario includes a recommendation, rating, target price, subject company relationship, business conflict, analyst interest, or public appearance, pause and ask whether disclosure is part of the decision.

Consider:

• What conflict exists?
• Who needs to know about it?
• When must it be communicated?
• Is the disclosure clear enough to be useful?
• Is it tied to the communication being made?
• Does the scenario suggest the disclosure is missing, delayed, hidden, or incomplete?

Do not treat “the firm has policies” as a substitute for disclosure if the question is about what the investor audience must receive. Likewise, do not treat disclosure as a cure for conduct that should not occur at all. Some scenarios require disclosure; others require preventing or escalating the underlying conduct.

Watch the difference between review and influence

Series 87 scenarios frequently involve someone reviewing research before publication. The key question is not only who sees the draft, but why they see it and what they do with it.

Ask:

• Is the review for factual accuracy?
• Is the review for legal, compliance, or supervisory purposes?
• Is the reviewer trying to change the analyst’s opinion, rating, price target, or conclusion?
• Is a business unit attempting to protect a deal, relationship, or revenue source?
• Is the analyst being pressured to soften or delay research?
• Is the review process documented and controlled?

A scenario may make a review sound routine, but the decisive fact may be that the reviewer is trying to influence the substance of the research for business reasons.

Treat “best next action” questions carefully

When the question asks for the best next action, avoid choosing an answer that skips a required step. Series 87 is often concerned with process: supervision, escalation, review, approval, documentation, and disclosure.

A defensible “next action” usually does one of the following:

• Stops distribution until the issue is resolved
• Escalates the matter to the appropriate supervisory, legal, or compliance function
• Requires correction or completion of disclosures
• Prevents improper influence over the analyst’s views
• Ensures the communication is reviewed under firm procedures
• Requires documentation of the review or decision
• Applies firm policy before the report or communication proceeds

If an answer choice immediately publishes, trades, communicates, or approves without resolving the identified issue, it may not be the most defensible answer.

Interpret common Series 87 scenario themes

Research report preparation

When the scenario involves drafting or publishing research, focus on:

• Whether the analyst has a reasonable basis for conclusions
• Whether the report contains a rating, recommendation, estimate, or price target
• Whether the language is fair, balanced, and not misleading
• Whether required disclosures are included
• Whether supervisory review or approval is complete
• Whether any reviewer is improperly influencing the analyst’s opinion
• Whether the report should be delayed, revised, or escalated before release

A useful question: “What must be true before this report can be distributed?”

Analyst independence

When the scenario involves pressure from investment banking, management, sales, trading, or the subject company, focus on independence.

Ask:

• Who is requesting the change?
• What part of the report are they trying to change?
• Is the request about factual accuracy or the analyst’s opinion?
• Is the change connected to a business relationship or transaction?
• Is the analyst being asked to adjust timing, tone, rating, target, or recommendation?
• Is the proper response to reject, escalate, document, or route through compliance?

The strongest answer will usually protect the analyst’s independent judgment and maintain proper controls.

Subject company involvement

When the subject company appears in the scenario, identify the purpose of the interaction.

Relevant questions:

• Is the company being asked to verify factual information?
• Is it being shown conclusions, recommendations, ratings, or price targets?
• Is it requesting a change that affects the analyst’s opinion?
• Is the firm controlling what is shared and documenting the process?
• Is there a risk of disclosing nonpublic information or permitting issuer influence?

Do not assume all contact with a subject company is improper. The issue is the scope, purpose, timing, and control of the communication.

Public appearances

When an analyst speaks in a public forum, such as a broadcast, conference, interview, webcast, or panel, focus on the audience and disclosures.

Ask:

• Is the analyst making a recommendation or expressing a view on a security?
• Are conflicts or relevant relationships disclosed appropriately?
• Is the statement fair, balanced, and not misleading?
• Is the analyst discussing information that should not be selectively disclosed?
• Does the firm have procedures governing public appearances?
• Is the answer asking what the analyst must say, what the firm must supervise, or what should be documented?

Public appearance questions often test whether the candidate recognizes that oral statements can create disclosure and supervision issues, even when no formal written research report is distributed.

Conflicts of interest

When a scenario mentions compensation, ownership, investment banking, issuer relationships, market making, client pressure, or business incentives, slow down.

Ask:

• What is the conflict?
• Whose conflict is it: analyst, firm, affiliate, department, or account?
• Does it require disclosure, restriction, supervision, or escalation?
• Is the conflict merely present, or is someone using it to influence research?
• Would a reasonable investor consider the information relevant to evaluating the research?

The answer should address the conflict directly. A vague statement such as “follow firm policy” may be less complete than an answer that identifies the specific disclosure, restriction, or escalation required.

Supervisory review and documentation

When the scenario includes a supervisor or principal, identify what the supervisor must evaluate.

Consider:

• Is the report complete and accurate?
• Are disclosures included?
• Was the report prepared independently?
• Is the communication consistent with firm procedures?
• Are conflicts addressed?
• Is documentation required to show review, approval, or escalation?
• Should distribution be delayed until a deficiency is corrected?

A supervisor’s role is not merely to approve quickly. In scenario questions, supervisory approval often means ensuring the process and content meet applicable standards before communication occurs.

Use answer choices to confirm, not to lead

Read all answer choices, but do not let them define the issue too early. After reading the stem, form a short prediction:

• “This is about improper influence.”
• “This is about missing disclosure.”
• “This is about whether the subject company may review the draft.”
• “This is about public appearance disclosures.”
• “This is about supervisory escalation before publication.”

Then compare each answer to your prediction.

A strong answer usually:

• Uses the correct actor
• Takes action at the correct time
• Addresses the actual problem
• Does not overstate permission
• Does not ignore required disclosure or supervision
• Does not rely on business convenience
• Does not cure an independence problem with a weak procedural step

If two answers sound plausible, choose the one that more completely protects investors, preserves independence, and follows the appropriate control process.

Short practice examples

Example 1: Draft review by a business unit

A research analyst prepares a report on a subject company. Before publication, a business unit asks to review the draft and suggests changing the tone because the firm is seeking future business from the company.

How to read it:

• Role: research analyst and business unit
• Activity: prepublication review
• Risk: improper business influence
• Decision point: whether the suggested change may affect the analyst’s independent view
• Best-action focus: preserve independence, use proper supervisory or compliance channels, and avoid business-driven changes to research conclusions

The best answer is likely the one that prevents improper influence and escalates or routes the issue appropriately, not the one that allows changes because the business relationship is important.

Example 2: Public appearance with a recommendation

An analyst discusses a covered company during a public webcast and states that the stock is attractive based on the analyst’s current view.

How to read it:

• Role: analyst
• Activity: public appearance
• Audience: public
• Risk: recommendation and potential disclosure obligations
• Decision point: what the analyst or firm must do in connection with the public statement

The best answer should address clear, timely, and relevant disclosures and fair communications, rather than treating the webcast as informal conversation.

Example 3: Subject company asks to correct facts

An issuer reviews limited factual information in a draft and notes that a product launch date is incorrect.

How to read it:

• Role: subject company
• Activity: factual review
• Risk: scope of issuer review
• Decision point: whether the requested correction is factual or an attempt to influence opinion
• Best-action focus: correct factual errors through the firm’s controlled process while protecting recommendations, ratings, and conclusions from issuer influence

The best answer should distinguish factual verification from improper review of the analyst’s opinion.

Build a fast annotation habit

During practice, annotate each scenario in a consistent way. You do not need long notes. Use short labels.

For example:

• Actor: analyst, supervisor, IB, issuer, client
• Communication: report, draft, public appearance, internal note
• Audience: public, customer, institutional, internal, issuer
• Trigger: rating, target, recommendation, conflict, review, disclosure
• Risk: independence, misleading statement, missing disclosure, MNPI, supervision
• Action: disclose, revise, escalate, approve, delay, restrict, document

This turns a dense paragraph into a decision tree.

A compact Series 87 scenario checklist

Before selecting an answer, ask:

• Who is acting, and do they have authority to do what they are doing?
• What type of communication or research activity is involved?
• Who is the audience?
• Is there a recommendation, rating, estimate, price target, or opinion?
• Is a conflict present?
• Is disclosure required or incomplete?
• Is anyone attempting to influence the analyst’s independent judgment?
• Is the review for factual, supervisory, legal, compliance, or business purposes?
• Is the communication fair, balanced, and not misleading?
• Is material nonpublic information implicated?
• Is supervisory approval, escalation, or documentation needed?
• Does the answer solve the actual problem before the activity proceeds?

If you cannot answer these questions, reread the scenario before looking at the choices again.

How to practice efficiently in final review

For final Series 87 review, do not only ask whether you got a question right. Review how you read it.

After each scenario, write one sentence for each of these:

• The role that mattered most was:
• The decision point was:
• The key fact was:
• The best answer was defensible because:
• The tempting but weaker answer failed because:

Then group missed questions by decision type:

• Disclosure
• Research independence
• Public appearance
• Subject company review
• Supervisory approval
• Conflicts of interest
• Communications standards
• Documentation or escalation
• Information barriers or nonpublic information

This helps you see whether your issue is content knowledge or scenario interpretation.

Final answer-selection rule

For Series 87 scenarios, the most defensible answer is usually the one that respects the full compliance process: identify the communication, preserve analyst independence, manage conflicts, make required disclosures, use proper supervision, and avoid misleading investors.

Do not reward the answer that is merely convenient, commercially helpful, or partially true. Choose the answer that best fits the actor, audience, timing, conflict, and required next action.

As a practical next step, complete a short set of scenario questions by topic, review your decision-point notes, and then take a timed mixed mock exam to practice applying the same reading process under exam conditions.