RGE Compliance: Detail
4CAST GROUP LIMITED (company number: 07260395) and all its subsidiaries do not conduct “investment research” as defined in the FCA Conduct of Business Sourcebook (COBS) section 12 nor does it provide “advice about securities” as defined in the Regulation of Investment Advisors by the U.S. SEC.
Nonetheless, RGE continues to develop and implement industry best practice to ensure compliance with relevant regulatory requirements for a research house operating in financial markets.
It has modeled its procedures by reference to a range of relevant legislation and industry codes.
1. Designated Officer
RGE has a designated compliance officer supported as necessary by a third-party professional who together are accountable for its compliance policies and procedures. The designated compliance officer shall delegate compliance responsibilities to others in the organization and establish escalation procedures.
2. Policies and Enforcement
RGE has and enforces compliance policies and procedures written in clear and understandable language. Breaches of policy are dealt with under the RGE disciplinary process.
3. Information Control
RGE maintains and enforces an information control protocol reasonably designed to minimize the risk of receiving or misusing confidential or potentially material non-public information as part of the analytic process in relation to policy, fixed income, equity or other non-equity financial markets. The policies are designed to detect such information promptly and allow it to be handled appropriately through clear documentation and procedures that are well-known and consistently followed.
Given its role in policy analysis, RGE’s information control protocol recognizes the provisions of the STOCK Act on U.S. government employees and other similar statutes and codes of conduct governing the provisioning of information by and receipt and use of information from political insiders and other government-related sources in the U.S. and elsewhere.
3.1 Meetings With Public Officials
If a meeting is contemplated between an RGE employee and a public official, whether in person or electronically, the RGE employee will seek prior permission from his or her line manager.
Permission may not be granted depending on the nature of the meeting contemplated and the level/experience of the RGE employee and of the intended public official. The decision to grant or not grant permission will be recorded. In the event that the meeting is scheduled at short notice, an email is sufficient to confirm permission.
RGE employees shall conduct meetings with public officials in a professional context and manner.
At all meetings with public officials, the RGE employee will state that they do not wish to be taken inside on any material non-public information (MNPI) and that they will use the information and insight that they receive in the meeting to develop their economic views.
3.2 Dealing With Suspected MNPI
If the RGE employee is concerned that MNPI has been, or indeed may have been, passed they will immediately terminate the meeting and notify the RGE Compliance Officer and Head of Research, who will log the event as a possible MNPI event.
No research publication using that MNPI will be allowed and the RGE Compliance Officer or the Head of Research will, as appropriate, raise the concern with the appropriate public body and any other statutory body.
No member of RGE will be permitted to contact a client or prospective client of RGE by any means on any subject related to the MNPI until such MNPI has been made public by a relevant public body.
Any breach of this provision will be considered as a disciplinary matter and may be reported to statutory authorities for further action.
3.3 Compliance Record of Meetings With Public Officials
The dates of meetings with public officials are recorded.
Following the meeting and prior to any associated research publication, the RGE employee will complete an entry in the compliance log, noting the public officials present in the meeting and attesting that no MNPI was passed. The employee’s own notebook record of the meeting will be made available to the Compliance Officer of Head of Research on request and should be safely maintained by the employee for a period of five years.
The compliance log will be completed as soon as practically possible after the meeting, if necessary via email to the Compliance Officer or another member of staff as designated by the Compliance Officer.
3.4 Whistleblowing MNPI
If any RGE colleague (A) suspects that MNPI has been received by another (B), but not reported as such then A has a duty to report such concern to the Compliance Officer or the Head of Research, who will log the concern and interview employee B. No research report will be published using that information.
If it is decided that employee B is in possession of MNPI, further training may be deemed necessary or the RGE disciplinary code may be invoked. Employee A will be commended and a record kept of the escalation to senior management.
3.5 Publication Lock Until Compliance Record Updated
No research report shall be published until the compliance log has been completed. Part of this protocol includes that the RGE Editorial Team checks for the log entry before final approval is given for publication.
3.6 Information Control and Other Third Parties
RGE does not conduct research on individual securities, but may from time to time have meetings with officials (whether public or private sector) related to such securities. Such meetings are governed by the same provisions as described above for the conduct of meetings with public officials in relation to policy matters.
The provisions of the RGE Information Control protocol described here shall also apply to any relationship RGE may have from time to time with external sources, including paid consultants. Paid consultants are required to agree in writing not to provide confidential information or MNPI, violate any terms of employment to which the consultant is subject regarding communication of information to third parties, or otherwise violate any contractual or legal obligations.
The use by RGE of paid consultants is regularly reviewed by compliance, with pre-approval of new consultants. Records are kept of paid consultants used by RGE.
4. Conflict Management
RGE does not conduct “investment research” as defined in the FCA Conduct of Business Sourcebook (COBS) section 12 nor does it provide “advice about securities” as defined in the Regulation of Investment Advisors by the U.S. SEC section 3.
Nonetheless, as part of its best-practice initiative, RGE has adopted certain Conflict Management policies in connection with the preparation and distribution of its publications, particularly with regard to its consultancy policy-research activities. The RGE Conflict Management protocol seeks to ensure the objectivity of its research and its fair treatment of all clients at all times.
4.1. Identification and Disclosure of Possible Conflicts
RGE policies and internal procedures, including training for research analysts,are designed to assist RGE in identifying possible conflicts of interest, or the appearance of conflicts of interest, that might affect or raise questions about the impartiality of its research.
Individual personnel are responsible for raising identified conflicts or potential conflicts with their supervisors to ensure that all conflict questions are referred to and considered at the appropriate level within RGE.
The analyst(s) responsible for a research report is (are) required to certify that the views expressed in each research report accurately reflect their personal views and not any consideration of the relationship to any policy maker or policy-making institution, and that the report has not been informed by and does not contain any MNPI (see "Certification on each research report").
4.2. Supervision and Compensation of Research Analysts
Supervision and reporting lines: Analysts who publish research reports are supervised by, and report to, Research Management. Senior analysts who are also part of the Research Management report directly to RGE’s CEO.
Evaluation and compensation: The compensation of research analysts is determined on the basis of a number of factors, including quality, accuracy and value of research, productivity, experience, individual reputation including with employees in other parts of RGE with whom the analyst interacts.
4.3. Activities of Analysts and Other Employees
RGE shall ensure that any consulting arrangement it may enter into does not compromise the objectivity of any publication subsequently made available to all clients (see also"Certification on each research report")
RGE employees may not be provided with material or confidential non-public information (see “Information Control”) without the prior consent of Research Management and a record of the request and circumstances must be made by the Compliance Officer in the compliance log. Such permission is not normally given and potentially results in restrictions on the employee's activities until the relevant non-public information has become public or stale.
Analysts' personal dealings: Analysts are generally prohibited from trading in securities related to their research coverage or to the area of expertise of any member of the analyst’s household if that member is also subject to procedures to guard against the passing of MNPI or might reasonably be expected to be subject to such procedures.
An analyst is prohibited from covering any entity if the analyst also serves as an officer, director or board member of the entity. If a member of an analyst's household serves in such a capacity, the analyst is also required to disclose that fact in any relevant research report, and Research Management will consider whether, based on the facts and circumstances, the analyst should cease covering the issuer.
Where personal account (PA) trading is permitted within the rules described above, analysts are required to comply with RGE's rules and procedures on personal account dealing. Those rules include a requirement that all staff identify to RGE the name and contact details of any brokerage service they may use and grant to RGE the authority to request from that brokerage copies of any contract notes in which RGE may have legitimate interest in investigating a suspected breach of its PA trading rules or the other provisions of its Disciplinary Code.
The RGE Compliance Officer will maintain a register of all such employee interests, including, where relevant, those of their household or other family members.
4.4. Inducements and Inappropriate Influences
RGE prohibits research analysts from soliciting or receiving any inducement in respect of their publication of research and restricts certain communications between research analysts and personnel from other business areas within RGE that might be perceived to result in inappropriate influence on analysts' views.
Inducements: RGE policies and procedures prohibit research analysts from directly or indirectly offering favorable research to an issuer as consideration or inducement for the receipt of business or compensation. These restrictions do not preclude the acceptance of reasonable hospitality in accordance with RGE's general policies on gifts, entertainment and corporate hospitality. Any hospitality or gifts with a value of greater than $50 (per capita) must be reported to the RGE Compliance Officer and recorded in the compliance log.
Similarly, RGE analysts are prohibited from providing inducements either directly or indirectly to sources of government officials. RGE analysts may provide reasonable hospitality with the prior written approval of RGE management. Any hospitality with a value of greater than $50 (per capita) must be reported to the RGE Compliance Officer and recorded in the compliance log.
Inappropriate influences: RGE has implemented policies and procedures, where appropriate, to regulate or prohibit communications between RGE research analysts and non-research personnel (see Timing and Content of Research).
Coverage decisions: Decisions to initiate, resume, suspend or discontinue research coverage are made by Research Management in conjunction with the research analyst concerned. Research Management is permitted to take into account input with respect to research coverage from other business areas.
Certification on each research report: The primary analyst responsible for a research report is required to certify, at the time of publication, that the views expressed in the report accurately reflect his or her personal views (always understood to be in the context of the RGE “house view”) about the subject securities or issuers, and that no part of his or her compensation was, is or will be directly or indirectly related to the specific views or recommendations contained therein. This certification can be found in the disclosures section of each such research report.
4.5. Review and Comment on Research
RGE policies and procedures are designed to ensure that parties with interests that may potentially conflict with those of recipients of research are not able to review or comment on research in a manner that might affect the impartiality of the research. In particular, no member of the RGE Sales team with an interest in securing consulting work plays any part in the review of research ahead of publication.
Review of research: Prior to publication, all research reports are peer-reviewed and approved for publication by a member of Research Management who is not the publishing or lead analyst. After Research Management approval, research notes are further reviewed by the Editorial team during the process of publication. Should Research Management or the Editorial team have compliance concerns, they shall request that the report be reviewed by a “reviewing analyst”; one who is sufficiently and appropriately experienced and who is independent from the normal RGE research process.
The purpose of these reviews is to confirm compliance with RGE's editorial guidelines and regulatory requirements, including the requirement that research be clear, fair and not misleading.
Complaints: Any complaints concerning the content of research reports should be referred to, and are dealt with by Research Management, where appropriate in conjunction with the Compliance Officer following RGE's complaint-handling procedures.
Retaliation policy: Neither RGE management nor any other RGE employee may retaliate or threaten to retaliate against any research analyst for any negative or otherwise unfavorable research that may adversely affect RGE's present or potential relationships with central banks or other public bodies.
4.6. Timing and Content of Research
RGE policies and procedures are designed to ensure that decisions on the timing and content of research are not made or inappropriately influenced by persons with interests potentially conflicting with those of recipients of research and that new, material views including changes to previously published views are not selectively disclosed before broad dissemination (front-running).
The timing of publication of a research report is determined primarily by the analyst on the basis of maintaining the principle that RGE is clear, fair and true at all times and, unless commissioned by a client under a consulting agreement, is made available to all clients simultaneously.
For the avoidance of doubt, RGE policies prohibit the communication of research in whole or part to clients ahead of the formal publication of that research. Formal publication shall be taken to mean the release to the website or covering email of the research by the Editorial team.
Any breach of these provisions including those against front-running will be dealt with under the RGE Disciplinary Process.
Dissemination of research and updated views: Research reports are made available to clients through a number of established distribution channels, including via e-mail and web-based portals. Any material update of a research analyst's view is made available to clients through similar channels. RGE policies do not allow research reports to be made available to personnel beyond the RGE research publication process before they are made available to all RGE clients.
Disclosure of interests: RGE discloses in its research reports, in accordance with applicable law and regulation, conflicts of interest, including those of RGE and the analyst, that are or may be material in the context of the relevant report.
4.7 Protection Against Front-Running Research
RGE does not permit its analysts or other staff with client contact to give advance notice by any means of intended publications or changes of view to one or more but not all clients simultaneously.
4.8 Consultancy: Information Control
Where RGE undertakes consultancy work it takes appropriate steps, including the use where necessary of Non-Disclosure Agreements, to safeguard against information gained in the course of the consultancy work being passed to other clients on a partial or selective basis.
If such information is able to be released to clients other than the consulting client, it will only be released by way of a publication made generally and simultaneously to all other clients. That general publication will contain a prominent note to the effect that information contained within it may previously have been released to clients under a consulting agreement.
5. Annual Employee Certification
RGE employees review and annually certify their agreement with the terms of the policies.
6. Employee Access to Compliance
RGE employees have ready access to all compliance policies and have the ability to seek clarification from RGE’s compliance professionals at any time.
7. Compliance Training
RGE provides regular and ad hoc compliance training for all employees. That training includes specific examples of confidential and potentially material non-public information that might be encountered in a macroeconomic or policy firm.
8. Spot Checks
RGE conducts “spot checks” on employee activity to ensure that it is consistent with policies.
9. Consultancy Disclosure
RGE performs custom research for clients from time to time. If some or all of the information gained in the course of that consultancy is subsequently published to clients within any (or all) specified RGE product line(s), the fact that the information was previously disclosed is disclosed to that broader distribution list of clients.
10. Document Warehousing
RGE retains all relevant documents and internal emails for a minimum of three years including: Compliance-related certifications; records of escalations; communications regarding potential material non-public information; draft reports; and other compliance-related documents.
 Henceforth, RGE.
 Background sources include: SEC Regulation of Investment Advisors; CFA Institute Research Objectivity Standards; NASD Rule 2711; NASD Rule 1120; NASD Notice to Members 04-18 (March 9, 2004); NASD Notice to Members 04-25 (March 2004); NASD Press Release, Sanford C. Bernstein & Co. (Feb. 8, 2006); NYSE Info Memo 04-10 (Mar. 9, 2004); NYSE Info Memo 04-16 (April 1, 2004); NYSE Rule 472; NYSE Rule
344.1; NYSE Rule 351; NYSE Rule 345; FINRA Regulatory Notice 08-55 (Oct. 2008); Regulation AC; Stop Trading on Congressional Knowledge (STOCK) Act of 2012; NIRI Best Practice Guidelines; Sarbanes-Oxley; Dodd-Frank; the UK Financial Conduct Authority (FCA) Conduct of Business Rules (COB); The Markets in Financial Instruments Directive 2004/39/EC (MiFID); recent case law; regulator sentiment; industry surveys. However, these best practices do not incorporate all of the specific requirements detailed in these sources or the full requirements for registered entities.