In response to a number of questions on the current standards for disclosure of conflicts of interest in research reports, the IDA has published a notice setting out the standards.

The current requirements arise out of securities legislation in various provinces. The legislation requires that dealers disclose in any research report whether the dealer or any of its officers or directors has:

  1. assumed an underwriting liability with respect to the securities, within the past 12 months;
  2. provided financial advice to the issuer for consideration within the past 12 months; or
  3. expects to receive any fees as a result of the recommended action.
      The IDA says that members should check the sections of the legislation applicable to any material they are issuing.

      In reviewing research reports, the IDA says its sales compliance staff check to ensure that disclosure is specific, consistent and legible. If applicable, reports should disclose that the member firm has had one of the relationships with the issuer in the past 12 months.

      Boilerplate indicating that it may have had such a relationship is not sufficient. The IDA says the disclosure should also be prominent and legible, not included in a mass of fine print or notes on the back pages of a lengthy report.

      The IDA is currently making changes to proposed Policy 11 on Analyst Standards after comments and discussions with members and the Canadian Securities Administrators.

      Policy 11 will require more disclosures and specifically state that they must be prominent. Where feasible, members should consider voluntary compliance with the new requirements prior to final approval by the Canadian Securities Administrators.