Research Report Content, Preparation, and Standards
What counts as a research report
Under FINRA Rule 2241, a research report is a written or electronic communication that analyzes a company or industry and contains a recommendation. Oral statements are public appearances, not reports. Debt research is covered separately by Rule 2242, so a common exam trap is classifying a communication incorrectly. The content standards still apply: the analyst must have a reasonable basis for the recommendation, the facts must be accurate, and the presentation must be fair and not misleading.
Facts versus opinions
Opinions may be wrong, but they cannot be unsupported. Reports must separate fact from opinion and disclose material facts. Ratings need clear definitions, and a price target should be tied to a stated valuation method and assumptions. Regulation AC requires the analyst to certify that the views are personal and that no part of compensation was tied to a specific recommendation.
Review boundaries
Investment banking personnel may review a draft only to check factual accuracy or identify conflicts. They may not dictate the conclusion, and the analyst must retain final authority over the content.
Trap and rule of thumb
A frequent trap is treating a favorable statement as acceptable because it is 'just an opinion.' The rule of thumb: if the report says 'we believe,' it still needs a reasonable basis; if it says 'guaranteed,' it is prohibited. Worked example: an analyst writes, 'Buy-management says earnings will double.' If management actually said it, attribute the statement to management; do not present it as the analyst's forecast without support.