Guidelines mooted for ethical public firm analysis

VIENNA, VIRGINIA: Two professional associations have proposed ethical guidelines governing the relationship between public companies and the analysts who track them.

The National Investor Relations Institute (NIRI) and the Association for Investment Management and Research (AIMR) hope the voluntary standards will foster objectivity.

NIRI president and CEO Lou Thompson said the growth of company-financed research and access to management were driving biased analysis.

Under the five standards in the proposed Best Practices for Governing the Analyst/Corporate Issuer Relationship, analysts must issue objective research and recommendations supported by thorough research and distinguish between fact and opinion.

Before publishing their reports, analysts might request that firms review for factual accuracy only those parts that don’t contain conclusions, recommendations, valuations or price targets.

Companies are called on to refrain from discriminating against analysts based on prior research, opinions, recommendations, earnings estimates or conclusions.

In addition, the proposal says companies should establish policies on how they will respond to requests for access to management. It suggests that when funding research, companies should hire only qualified analysts and not attempt to influence reports.

‘We’re trying to stake out what the best practices are and hope by delineating that and raising the bar a bit, it will improve communications between companies and analysts,’ Thompson commented.

A consultation period will end on 31 May, and final approval of the rules is expected this summer.

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