Am I right that the ROS recommend that an analyst salary should not be linked to investment banking activities. However if it is and it is disclosed it is ok? I.e. it is a recommendation and not requirement.
It can’t be directly linked. Directly is the key word
Ok. But if the analyst salary is determined by:
Accuracy of recommendation
Firms overall profit
Direct link to IB revenues.
Is that not ok?
Also, is that that just a recommendation and not a requirement? Everybody knows that sellside analysts’ salaries are linked to IB revenues…
It’s a requirement. ROS specifically uses the words “must” (when stating what firms have to do) and “prohibited” regarding a direct link to IB revenues. #3 above in not ok. ROS goes on to say that if there is an indirect link to IB revenues, firms “should” disclose it.
Direct link - Prohibited
Indirect link - Recommend disclosure