Who is Integrity Research?
What is a compliance accreditation?
How does a research firm achieve accreditation?
What are best practices?
What risks do best practices address?
Do all research firms have to follow the same best practices?
What are the accreditation standards?
What are key compliance controls?
What is information control?
Give me an example of accreditation standards.
What due diligence does Integrity perform?
What happens if a research firm fails?
Who pays for accreditations?
Is Integrity’s accreditation conflicted?
How can I tell whether a firm is accredited?
What does the accreditation seal look like?
How long is an accreditation good for?
Are accreditations monitored?
What use are accreditations to asset managers?
How do I get more information?
Who is Integrity Research?
Integrity Research has been monitoring third party research providers since 2003. The principals of the firm, Michael Mayhew and Sanford Bragg, are well-known experts on the independent research industry. The firm began compiling compliance best practices in 2008, when it published its first study of the expert network industry. Its compliance practice is headed by Susan Mathews, former Senior Counsel in the SEC’s Enforcement Division and regulatory liaison for independent research under the Global Research Analyst Settlement.
What is a compliance accreditation?
Research firms which follow industry best practices for compliance are eligible for accreditation by Integrity Research. A compliance accreditation is represented by a recognizable seal indicating that a research firm has undergone a third-party review and meets industry standards for compliance.
How does a research firm achieve accreditation?
To receive accreditation, research firms must submit to due diligence from Integrity Research and meet the standards for accreditation. Accredited firms need to demonstrate that appropriate policies are in place, but also that the policies are understood and actually practiced, rather than just window dressing.
What are best practices?
Because most third party research firms are unregulated and many types of research such as expert networks or channel checkers have no regulatory standards, Integrity Research has compiled industry best practices over the years. Input has come from industry practitioners and compliance professionals at asset managers, as well as recent case law, regulator sentiment, applicable laws, rules and regulations, and industry surveys.
What risks do best practices address?
Compliance best practices are intended to reduce risks related to exposure to confidential and material non-public information as well as other potential compliance-related risks, such as selective disclosure, front-running, conflicted research and anti-bribery statutes.
Do all research firms have to follow the same best practices?
No. Although many best practices are consistent across all types of research firms, not all research firms have the same risks. For example, firms that facilitate direct consultations with external consultants, such as expert networks, require more safeguards than research that is intermediated through written reports. [See our best practices for expert networks here.] Yet reports can raise issues of selective disclosure, which aren’t relevant for firms that don’t produce reports, such as expert networks. For this reason, there are specific best practices compiled for each type of research firm.
What are the accreditation standards?
To receive accreditation, a research firm needs to demonstrate that it follows each of the key compliance controls designated for the type of research it produces, as well as a majority of the overall best practices relevant to the research processes of the firm.
What are key compliance controls?
Key compliance controls are best practices that are mandatory for receiving accreditation. All accredited firms must have a designated compliance professional who is accountable for the firm’s compliance policies and procedures, information control policies and procedures that are well-known and consistently followed and provide a regular compliance training program for all employees. Additional controls are required based on the research methodology used by the firm.
What is information control?
Information control refers to policies designed to reduce the risk of receiving and/or disseminating confidential and potentially material non-public information, whether pertinent to equity or non-equity financial markets.
Give me an example of accreditation standards.
An accredited forensic research firm has demonstrated it follows each of six key compliance practices for forensic research firms:
Designated compliance professional, information control policies and procedures, a regular training program, monitoring where its employees obtain information, escalation procedures for confidential and potentially material non-public information, and trading guidelines.
An accredited forensic research firm also follows the majority of the fifty-seven compliance best practices for forensic research firms:
Best practices for forensic research firms include policies covering short ideas recommended by clients, selective disclosure, front running, anti-bribery statutes and trading violations, as well as information controls.
What due diligence does Integrity perform?
The accreditation process starts with a questionnaire covering organizational information, the firm’s research process, and compliance policies and practices. The questionnaire also requests copies of various documents. Integrity Research performs background checks for any regulatory violations on key personnel. The next step is a set of interviews with compliance staff, analysts, and, depending on the firm, sales personnel and/or administrative staff. The purpose of the interviews is to better understand the firm’s research process and day-to-day compliance practices. After the interviews, a template comparing the firm’s practices to industry practices is completed and reviewed by a committee headed by Integrity’s counsel.
What happens if a research firm fails?
If a research firm does not follow all the required key compliance controls or fails to meet a majority of the compliance best practices, it will be informed of the deficiencies and has up to three months to address deficiencies.
Who pays for accreditations?
Usually research firms pay the accreditation fee; however, occasionally research distributors or others pay. To preserve objectivity, fees are paid in advance before the accreditation process begins, and are non-refundable, regardless of whether a firm attains accreditation.
Is Integrity’s accreditation conflicted?
Integrity Research has implemented a number of safeguards to protect the validity of the accreditation process. First, the best practices guidelines have been set at a high level, so that few if any firms would attain all of best practices for their industry. Second, the accreditation process is transparent. Best practices are published so everyone knows exactly what is required. Third, accreditations are attained through a well defined, structured process. A firm either attains the mandatory practices and majority of the overall practices or it fails to receive accreditation. Fourth, all accreditations are reviewed by an internal committee chaired by Integrity Research’s counsel. Finally, payments for accreditations are made upfront whether the accreditation is achieved or not.
How can I tell whether a firm is accredited?
Accredited firms use the Compliance Accreditation Seal, which links to details about the firm’s accreditation and the best practices under which it was accredited. In addition, Integrity maintains on its website a list of accredited firms, with links to their accreditation details and best practices. Asset managers are welcome to contact Integrity for additional details about an accredited firm provided the accredited firm agrees.
What does the accreditation seal look like?
How long is an accreditation good for?
Accreditations are valid for 12 months from the time they are received.
Are accreditations monitored?
Integrity Research will review an accreditation whenever it is made aware of a change in control, changes in compliance or legal staff, new research products or other changes that might impact the accredited firm’s compliance practices. Accredited firms are required to inform Integrity of significant changes that might impact a firm’s compliance level.
What use are accreditations to asset managers?
Accreditations supplement asset managers’ current diligence, as a cross-check or verification. Accreditations incorporate a level of due diligence which is time-consuming and costly for asset managers to perform on all external research providers. Standardized best practices provide additional transparency in a lightly regulated industry.
How do I get more information?
Overview of Compliance Accreditations: http://www.integrity-research.com/cms/overview-of-integrity-research-compliance-accreditations/
Integrity contacts:
Sandy Bragg, sanford.bragg@integrity-research.com, 646-786-6855
Susan Mathews, susan.mathews@integrity-research.com, 646-786-6868
Mike Mayhew, michael.mayhew@integrity-research.com, 646-786-6859