SEC Consents to Modification of Global Research Analyst Settlement
Commentary by Steven Lofchie
The Securities and Exchange Commission ("SEC") agreed to modify final judgments against investment firms that were part of a 2003 and 2004 Global Research Analyst Settlement regarding potential conflicts of interest between equity research analysts and investment banking personnel.
The original Global Research Analyst Settlement involved enforcement actions against twelve investment banks and two individuals. The final judgments included an Addendum containing specific undertakings, as well as a "sunset provision" indicating that newly adopted rules would eventually supersede these undertakings. (Note: In 2015, the regulatory landscape shifted when FINRA adopted, and the SEC approved, Rule 2241 ("Research Analysts and Research Reports"). This rule specifically addresses the same conflicts of interest between research and investment banking within registered broker-dealers that the original settlement sought to manage.)
The settling firms filed motions in June and December 2025 seeking to terminate the remaining undertakings in the Addendum, citing the implementation of FINRA Rule 2241. The SEC acknowledged the sunset provision and the passage of the new rule, stating that it believes the modification is in the public interest. The SEC consented to the request, subject to court approval.
SEC Commissioner Mark T. Uyeda issued a statement supporting the action, characterizing the original settlement terms as "outdated and costly requirements" that have negatively impacted the availability of research, particularly for smaller companies. Commissioner Uyeda argued that the original settlement was a product of enforcement actions that never underwent notice-and-comment rulemaking, whereas the current framework—specifically FINRA Rule 2241—offers a "robust framework" that is principles-based, transparent, and capable of consistent interpretation across firms.
Commentary
The fact that this judicially-ordered settlement survived for over twenty years is a demonstration of how difficult the regulators and the courts find it to rescind any rule (or pseudo-rule in this case) once adopted. There is simply no justification for a judicial order to apply to a group of twelve firms twenty years after the relevant events.
If the terms of the settlement were meaningful from a regulatory standpoint, they should have been applied to everyone. If the terms of the settlement were simply one more regulatory hassle, which is the case here, they are rightfully rescinded and should have been rescinded long ago. Consider this: how many of the individuals involved in the events that precipitated the settlement are still active in the securities business and working at one of the impacted firms?