• INMA Schedule 4 INMA Schedule 4 Additional obligations for investment research recommendations

    • INMA S4.1 Investment research recommendations — additional requirements

      (1) An INMA firm must take reasonable care to ensure that a research recommendation produced by it:
      (a) indicates all substantially material sources (including, if appropriate, the issuer and whether the research recommendation has been disclosed to the issuer and amended after this disclosure;
      (b) adequately summarises any basis of valuation or methodology used:
      (i) to evaluate a security, a derivative or an issuer; or
      (ii) to set a price target for a security or derivative;
      (c) adequately explains the meaning of:
      (i) any recommendation made (for example, 'buy' 'sell' or 'hold') and the time horizon applying to the recommendation; and
      (ii) any risk warnings, including any sensitivity analysis of the relevant assumptions; and
      (d) refers to:
      (i) the planned frequency (if any) of updates of the research recommendation; and
      (ii) any major changes in the scope of the research as previously announced; and
      (e) states clearly and prominently:
      (i) the date the research recommendation was first released for distribution; and
      (ii) the date and time of any security or derivative price mentioned.
      (2) If the substance of the research recommendation (the later recommendation) differs from the substance of an earlier research recommendation that was about the same security, derivative or issuer and was issued during the 12-month period before the day of dissemination of the later recommendation, the later recommendation must clearly and prominently indicate the difference and state the date of the earlier research recommendation.
      (3) If complying with the requirements of subrule (1) (a), (b) or (c) would be disproportionate to the length of the research recommendation and there has been no change in the methodology or basis of valuation used, the INMA firm may, instead of complying with the requirements, clearly and prominently refer in the research recommendation to where the required information can be directly and easily accessed (for example, by a hyperlink to the information on an appropriate web page of the firm).
      (4) Subrule (1) (a) does not apply in relation to a non-written research recommendation to the extent that complying with it would be disproportionate to the length of the research recommendation.
      Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

    • INMA S4.2 Investment research recommendation — general standards for disclosure of interests etc

      (1) An INMA firm must disclose, in a research recommendation produced by it:
      (a) all of its relationships and circumstances that may reasonably be expected to impair the objectivity of the research recommendation, and in particular:
      (i) any significant financial interest in a relevant investment that is the subject of the research recommendation;
      (ii) a significant conflict of interest in relation to an issuer; and
      (b) relationships and circumstances, of the kind mentioned in paragraph (a), of each person working for the firm who was involved in preparing the substance of the research recommendation, including whether the person's [individual's?] remuneration is tied to investment banking transactions performed by the firm or any affiliate of the firm.
      (2) If the INMA firm is a legal person, the information disclosed must include the following:
      (a) any interests or conflicts of interest of the firm or any related person that are accessible, or reasonably expected to be accessible, to the persons involved in the preparation of the substance of the research recommendation;
      (b) any interests or conflicts of interest of the firm or any related person known to persons who, although not involved in the preparation of the substance of the research recommendation, had or could reasonably be expected to have had access to the substance of the research recommendation before its dissemination (other than persons whose only access to the research recommendation was to ensure compliance with relevant regulatory or statutory obligations, including the disclosures required under this Schedule).
      (3) If the disclosures required by subrules (1) and (2) would be disproportionate to the length of the research recommendation, the INMA firm may, instead of complying with the requirements of the subrules, clearly and prominently refer in the research recommendation to where the required disclosures can be directly and easily accessed (for example, by a hyperlink to the disclosures on an appropriate web page of the firm).
      (4) Subrules (1) and (2) do not apply in relation to a non-written research recommendation to the extent that complying with them would be disproportionate to the length of the research recommendation.
      Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

    • INMA S4.3 Investment research for recommendations — additional requirements for disclosure of interests

      (1) This rule applies to a research recommendation produced by an INMA firm in relation to a relevant investment.
      (2) The INMA firm must clearly and prominently disclose in the research recommendation the following information on its interests and conflicts of interest:
      (a) major shareholdings that exist between it or any related person and the issuer (the relevant issuer) including:
      (i) shareholdings exceeding 5% of the total issued share capital in the relevant issuer that are held by the firm or any related person; or
      (ii) shareholdings exceeding 5% of the total issued share capital of the firm or any related person that are held by the relevant issuer;
      (b) any other financial interests held by the firm or any related person in relation to the relevant issuer that are significant in relation to the research recommendation;
      (c) if applicable, a statement that the firm or any related person is a market maker or liquidity provider in the securities of the relevant issuer or in any related derivatives;
      (d) if applicable, a statement that the firm or any related person has been lead manager or co-lead manager, over the previous 12 months, of any publicly disclosed offer of securities of the relevant issuer or in any related derivatives;
      (e) if applicable, a statement that the firm or any related person is party to any other agreement with the relevant issuer for the provision of investment banking services;
      (f) if applicable, a statement that the firm or any related person is party to an agreement with the relevant issuer relating to the production of the research recommendation.
      (3) Subrule (2) (e) does not apply in relation to an agreement if:
      (a) disclosure of the statement would involve the disclosure of confidential information; and
      (b) the agreement has been in force for at least 12 months or has given rise during that period to a payment or to the promise of payment.
      (4) The INMA firm must disclose, in general terms, in the research recommendation the organisational and administrative arrangements set up within the firm to effectively prevent or deal with conflicts of interest in relation to research recommendations, including information barriers.
      (5) If a person working for the INMA firm who is involved in the preparation of the research recommendation receives or buys shares of the relevant issuer before a public offering of the shares, the price at which the shares were acquired and the date of acquisition must be disclosed in the research recommendation.
      (6) The INMA firm must publish the following information on a quarterly basis, and must disclose in its research recommendations:
      (a) the proportion of all research recommendations published during the quarter that are 'buy', 'hold', 'sell' or equivalent terms;
      (b) the proportion of relevant investments in each of those categories issued by issuers to which the firm provided material investment banking services during the last 12 months.
      (7) If the disclosures required by subrules (2) to (6) would be disproportionate to the length of the research recommendation, the INMA firm may, instead of complying with the subrules, clearly and prominently refer in the research recommendation to where the required disclosures can be directly and easily accessed (for example, by a hyperlink to the disclosures on an appropriate web page of the firm).
      (8) Subrules (2) to (6) do not apply in relation to a non-written research recommendation to the extent that complying with them would be disproportionate to the length of the research recommendation.
      Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

    • INMA S4.4 Investment research recommendations — identity of disseminators of recommendations

      If an INMA firm disseminates a research recommendation produced by a third party, the INMA firm must ensure that the research recommendation clearly and prominently identifies the firm.

      Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

    • INMA S4.5 Investment research recommendations — requirements for dissemination of third party recommendations

      (1) If a research recommendation produced by a third party is substantially changed before dissemination by an INMA firm, the firm must ensure that:
      (a) the disseminated material clearly describes the change in detail;
      (b) if the change consists of a change of the direction of the recommendation (for example, changing a 'buy' recommendation into a 'hold' or 'sell' recommendation), the firm complies with section S4.3 to the extent of the change, as if the firm were the producer of the research recommendation; and
      (c) it has a formal written policy under which the persons receiving the research recommendation are directed to where they can have access to the identity of the producer of the research recommendation, the research recommendation itself, and the disclosure of the producer's interests or conflicts of interest, to the extent that they are publicly available.
      (2) Subrule (1) does not apply in relation to news reporting on research recommendations produced by a third party if the substance of the research recommendation is not changed.
      (3) If an INMA firm disseminates a summary of a research recommendation produced by a third party, it must ensure that the summary:
      (a) is fair, clear and not misleading;
      (b) identifies the source research recommendation; and
      (c) identifies where the third party's disclosures (to the extent that they are publicly available) relating to the source research recommendation can be directly and easily accessed (for example, by a hyperlink to the disclosures on an appropriate web page of the firm).
      Inserted by QFCRA RM/2019-4 (as from 1st January 2020).