Ethics - Analyst salary not linked to investment banking, a requirement or recommendation?

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:

  1. Accuracy of recommendation

  2. Firms overall profit

  3. 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