On the one-year anniversary of the Sarbanes-Oxley Act, the Securities and Exchange Commission has approved a series of rules regarding research analyst behaviour made by the self-regulatory organizations to fulfill the requirements of the act.

The rules aim to build on previous regulatory actions and take a number of significant additional steps towards promoting the independence and objectivity of research. Specifically, the rules separate research analyst compensation from investment banking influence and insulate research analysts from investment banking interests by prohibiting analysts from participating in “pitches” or other communications for the purpose of soliciting investment banking business.

The rules extend quiet periods for all firms involved in offerings and prohibit “booster shot” research reports in and around lock-up expirations. The rules also require enhanced disclosure of compensation arrangements between firms and issuers and client relationships between firms, their affiliates, and issuers.

The rules require firms to notify their customers in final reports when they are terminating research coverage of covered companies. Another rule prohibits firms from retaliating, or threatening to retaliate, against research analysts who publish reports or make public appearances that may adversely affect firms’ investment banking business. Finally, the rules impose registration, qualification, and continuing education requirements on research analysts.

SEC chairman William Donaldson said, “Working closely with the New York Stock Exchange and the NASD, the rules approved by the SEC today require a critical and necessary separation of research analyst compensation from investment banking.”

These rules are the latest among a series of regulatory actions taken during the last year to promote the integrity of research. Most recently, on April 28, the SEC, the NASD, the NYSE, and the states announced the settlement of enforcement actions against 10 of the nation’s top securities firms alleging undue influence by investment banking interests on the firms’ research.