Series 14: 9.3.7.2. Joint Due Diligence

Taken from our Series 14 Online Guide

9.3.7.2. Joint Due Diligence

A firm’s research analysts can work on due diligence matters, but their work must be independent of the firm’s investment bankers. Joint due diligence refers to any due diligence activities performed by a research analyst in the presence of personnel from the firm’s investment banking department—for example, a due diligence meeting with the client’s management (or the client’s other advisors, such as legal counsel or accountants) attended by both investment bankers and research analysts. Unless the client is an EGC, joint due diligence is prohibited for any investment banking transaction prior to the issuer selecting an underwriter. This restriction is intended to insulate the research analyst from pressure to market the investment bank’s services to prospective clients.

FINRA Rules 2241 and 2242, SEC Release No. 34-75471

Summary Table

RULES REGARDING RESEARCH ANALYSTS

Rules for Client Interactions

Rule

Exemption If Client Is EGC?

No joint due diligence prior to selection of an underwriter

Yes

Research analysts may not participate in bake-offs

Partial: analysts may attend but not participate in soliciting business

Research analysts may not participate in road shows

No

Marketing materials for an offering may not imply that favorable research coverage will be given to the offering

No

Quiet period after start date of offering (10 days for IPO, 3 for secondary offering)

Yes

Internal Rules

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