The Association for Investment Management and Research has released an issues paper examining the objectivity of brokerage-firm research.

The paper makes several recommendations about what various market participants can do to improve objectivity. Among the suggestions:

  • Brokerage firm management must provide an environment in which analysts are neither coerced nor enticed into issuing research that does not reflect their true opinions;
  • Lines of reporting within the research and investment banking functions must be kept separate;
  • Investment banking personnel should not have any authority over research recommendations; and
  • Firms must have clear personal investment and trading policies governing their investment professionals.

.AIMR says it is developing measurable “Research Objectivity Standards” that will enable firms that adopt them to publicize their compliance with the industry’s highest standards for analyst independence and research objectivity. Investors will then be able to easily identify firms that adhere to the AIMR standards, which will give firms a point of ethical distinction as they market their services to investors.

AIMR’s president and CEO, Thomas Bowman, said, “AIMR is in a unique position to evaluate the questions that have been raised about research objectivity and propose solutions that will set a higher standard for all concerned: Our 50,000 members work across the globe and in all aspects of the investment industry. About 10% of our members are sell-side research analysts; most of the rest are ‘consumers’ of sell-side research for their clients, whether institutional or individual investors.”

The issues paper is the product of the AIMR Task Force on Analyst Independence. The AIMR Board of Governors established the task force to examine public, industry and media concerns about research objectivity and propose voluntary solutions.

The task force is made up of professionals from various investment perspectives, including sell-side research, institutional fund management, investment firm management, and corporate investor relations. It is chaired by Arthur Zeikel, retired chairman of Merrill Lynch Asset Management and a member of the AIMR Board of Governors.

The task Force is also expanding AIMR’s “Standards of Practice Handbook” to provide further guidance to its members and others on acceptable and unacceptable practices related to issuing (or attempting to influence) research reports and recommendations. Both of these further task force initiatives are planned for public release by year-end.