Series 24 Domain 5: Supervision of Investment Banking and Research Welcome to your Series 24 Domain 5: Supervision of Investment Banking and Research 1. Series 24: Supervision of Investment Banking and Research When new regulations mandate enhanced transparency in research report disclosures, what initial steps should the supervisor take? Update the firm's compliance manuals and train all research staff on the new requirements. Wait to see how competitors implement the changes before making any adjustments. Minimize disclosure to preserve the firm's proprietary methodologies. Dispute the regulations through industry channels. None 2. Series 24: Supervision of Investment Banking and Research If a supervisor discovers that confidential financial projections have been used in a research report without authorization, what is the immediate step to take? Reprimand the analyst responsible for the inclusion. Withdraw the report from circulation and correct the oversight. Ensure all future reports undergo stricter compliance checks. Both B and C. None 3. Series 24: Supervision of Investment Banking and Research Which of the following is NOT a responsibility of a principal regarding the supervision of research analysts? Reviewing and approving research reports before publication. Ensuring that research analysts do not report to investment banking personnel. Assigning research analysts to cover specific industries or companies. Directly negotiating the compensation of research analysts based on specific investment banking transactions. None 4. Series 24: Supervision of Investment Banking and Research What must a supervisor in investment banking ensure regarding the quiet periods following an IPO? Research reports are issued immediately after the IPO to support stock pricing. A blackout period is enforced during which no research reports are published about the issuer. Research reports must criticize the management if the IPO performs below market expectations. Trading of the IPO stock is restricted to institutional investors only. None 5. Series 24: Supervision of Investment Banking and Research In managing conflicts of interest in investment banking, which of the following is NOT an accepted practice? Allowing investment bankers to review and suggest changes to research reports before publication. Implementing information barriers between investment banking and research departments. Documenting the procedures that ensure research analyst independence. Regular training sessions for research analysts on handling potential conflicts of interest. None 6. Series 24: Supervision of Investment Banking and Research When must a supervising principal sign off on a research report before its release? Only if the research report is on the company's own stock. Whenever the research report includes a change in rating or price target. If the report includes a first-time rating or coverage initiation of a company. Only when the research report includes information about an upcoming IPO. None 7. Series 24: Supervision of Investment Banking and Research What is required under FINRA rules when a research analyst is involved in a road show for an IPO? The research analyst must prepare a separate report to be distributed at the road show. The research analyst is required to disclose personal holdings in the IPO. Research analysts are prohibited from participating in road shows. The research analyst must be supervised by a compliance officer during the road show. None 8. Series 24: Supervision of Investment Banking and Research How should a supervisor handle potential conflicts of interest disclosed by a research analyst regarding a family member working at a covered company? Ignore the disclosure if the family member is not in a high-ranking position. Restrict the analyst from covering any companies where conflicts exist. Require that the analyst disclose the conflict in all reports on the company. Allow the analyst to continue coverage with periodic reviews of their work. None 9. Series 24: Supervision of Investment Banking and Research Under FINRA regulations, what is an essential element of training for new research analysts in investment banking? Technical analysis of stock trends. Regulations concerning the confidentiality of investment banking transactions. Sales techniques for pitching investment products. The basics of personal finance management. None 10. Series 24: Supervision of Investment Banking and Research Which of the following practices is recommended to maintain the independence of research analysts from investment banking influences? Research analysts should report directly to the head of investment banking. Compensation for research analysts should be linked to specific investment banking transactions. Physical separation of research department and investment banking areas. Allow investment bankers to have input on which companies are covered in research reports. None 11. Series 24: Supervision of Investment Banking and Research What should be the supervisory response if a research analyst receives an offer to participate in a pitch meeting for a potential IPO? Allow participation to gain first-hand information. Permit attendance but only in a passive, observational capacity. Decline the offer to prevent conflicts of interest. Require the analyst to disclose any opinions formed during the meeting in subsequent reports. None 12. Series 24: Supervision of Investment Banking and Research How should a supervisor address the issue of a research analyst who wants to engage in a public appearance discussing securities? Prohibit all public appearances to avoid potential conflicts of interest. Allow the analyst to make public appearances without restrictions. Require that the analyst discloses their affiliation with the firm and any relevant conflicts of interest. Supervise and approve the content of all public communications beforehand. None 13. Series 24: Supervision of Investment Banking and Research Which statement best reflects the supervision required over dual-role employees working in both investment banking and research departments? Supervision is not required if the employee maintains confidentiality. Specific procedures must be in place to handle potential conflicts of interest. Dual roles are prohibited under all circumstances. Employees can freely share information between departments to promote synergy. None 14. Series 24: Supervision of Investment Banking and Research When dealing with third-party research providers, what is a supervisory requirement? To ensure third-party researchers are financially compensated by the subjects they cover. To maintain a contractual relationship that ensures independence from the covered companies. To allow third-party researchers to directly communicate with investment bankers. To supervise third-party researchers as internal employees. None 15. Series 24: Supervision of Investment Banking and Research What is required to maintain the integrity of research when a firm is both underwriting an IPO and issuing research on the IPO issuer? Immediate publication of research reports following the IPO. Ensuring that research reports on the IPO issuer are only issued after the quiet period. Coordinating research report releases with the marketing efforts of the IPO. Allowing unrestricted access between the underwriting and research teams. None 16. Series 24: Supervision of Investment Banking and Research What action is required by a supervisor if a research report on a company is to be issued shortly after the company has announced a merger or acquisition? Accelerate the publication to coincide with the market reaction. Review and potentially revise the report to reflect the new business landscape. Proceed with publication without review, maintaining the original analysis and conclusions. Delay the report until the company's competitors have also issued their responses. None 17. Series 24: Supervision of Investment Banking and Research Which of the following is a required practice when a firm prepares to publish a research report on a company for which it has also performed significant investment banking services in the past year? The report must omit any mention of the investment banking relationship. The relationship must be prominently disclosed at the beginning of the report. The research must be approved by the CEO of the investment banking client. Investment bankers must be given the opportunity to review the report before publication. None 18. Series 24: Supervision of Investment Banking and Research In the case of an analyst covering a high-profile IPO, what is the supervisory requirement for managing non-public information obtained during the research process? Share the information with the firm's institutional clients to gain competitive advantage. Keep the information confined within the research team until the IPO is publicly launched. Release the information in a research note to all clients immediately. Use the information to advise the investment banking team on pricing strategies for the IPO. None 19. Series 24: Supervision of Investment Banking and Research What are the supervisor's responsibilities when a research analyst plans to issue a report on a company where there is a known forthcoming regulatory action that could impact the company's stock? Ensure that the report waits until the regulatory action is public. Advise the analyst to ignore the regulatory action in the report to maintain neutrality. Have the analyst include a speculative section about potential outcomes of the regulatory action. Verify that any mention of the regulatory action is based on public information and appropriately disclaimed. None 20. Series 24: Supervision of Investment Banking and Research Under what condition should a supervisor intervene to prevent the publication of a research report? If the report could potentially cause a short-term decrease in the stock's price. When the research might conflict with the firm's other financial interests. If the report includes material non-public information inadvertently. Whenever the report diverges from the consensus view within the firm. None 21. Series 24: Supervision of Investment Banking and Research What supervisory actions are required when transitioning a research analyst from covering one industry to another? Immediate reassignment without additional training. Comprehensive retraining in the new industry before reassignment. A brief overview of key companies in the new industry. No specific actions as long as the analyst agrees to the change. None 22. Series 24: Supervision of Investment Banking and Research What supervisory practices are essential when a research report is about to downgrade a major client of the investment banking division? Ensure that the downgrade is based solely on substantial evidence and research. Coordinate the timing of the downgrade with the client to minimize impact. Provide advance notice to senior management within the client company. Modify the report to lessen the severity of the downgrade. None 23. Series 24: Supervision of Investment Banking and Research What is the supervisor's responsibility when an analyst wants to change a stock rating based on a recent personal investment in the stock? Encourage transparency and allow the change if it aligns with the firm's overall views. Prohibit the change to avoid any appearance of conflict of interest. Require the analyst to disclose their personal investment in the report. Review the basis for the rating change independently before approval. None 24. Series 24: Supervision of Investment Banking and Research What is the required action when a supervisor discovers that a research analyst has accepted travel accommodations from a company under coverage to attend a corporate event? Require the analyst to reimburse the company for the travel expenses. Disclose the acceptance of travel accommodations in the next research report. Prohibit any future reports on the company by the analyst to avoid a conflict of interest. Document the incident and ensure no favorable bias appears in subsequent reports. None 25. Series 24: Supervision of Investment Banking and Research In the case where proprietary research is leaked prior to publication, what is the supervisor's best course of action? Proceed with the scheduled release to avoid creating undue market impact. Investigate the leak, identify the source, and address the breach of confidentiality. Delay the release until market conditions stabilize. Revise the research to include the impact of the leak. None 26. Series 24: Supervision of Investment Banking and Research How should a supervisor respond when an analyst frequently changes ratings on companies based on market rumors rather than solid research? Encourage the analyst to continue if the ratings changes increase trading volumes. Overlook the practice as long as the changes are profitable. Implement stricter review processes for rating changes. Promote the analyst for adaptive strategies in dynamic market conditions. None 27. Series 24: Supervision of Investment Banking and Research What is the supervisor's role in overseeing communications between research analysts and the media? Ensure all communications are pre-approved by the legal department. Allow analysts free communication to enhance the firm's visibility. Monitor and record all analyst interactions with the media. Only allow senior analysts to speak with the media. None 28. Series 24: Supervision of Investment Banking and Research What must be included in a supervisor's checklist when ensuring compliance with the Global Research Analyst Settlement? Confirmation that analysts receive bonuses based on investment banking performance. Verification that research is disseminated internally before being sent to clients. Assurance that research analysts and investment bankers are strictly segregated. Procedures allowing investment bankers to alter research content before publication. None 29. Series 24: Supervision of Investment Banking and Research What actions are necessary when a research analyst is offered a board position at a company they cover? Accept if the position is unpaid. Decline to avoid any conflicts of interest. Accept and disclose this in all future research reports. Consult with legal advisors before making a decision. None 30. Series 24: Supervision of Investment Banking and Research Which statement best reflects the supervision required over dual-role employees working in both investment banking and research departments? Supervision is not required if the employee maintains confidentiality. Specific procedures must be in place to handle potential conflicts of interest. Dual roles are prohibited under all circumstances. Employees can freely share information between departments to promote synergy. None 1 out of 30 Time is Up! Time's up
