On 4 October 2018, the Association for Financial Markets in Europe (AFME) published a guidance note (the Guidance) on financial analysts’ interactions with representatives of private companies and/or their financial advisers under COBS 12.2.21A G (the Rule). The Rule came into force on 1 July 2018.

The Rule applies to recital 56 of the MiFID Organisational Regulation, outlining that ‘financial analysts should not engage in activities other than the preparation of investment research where engaging in such activities would be inconsistent with the maintenance of that person’s objectivity’.

One such activity noted in recital 56 is ‘participating in pitches’ which has also been given a more detailed definition in the Rule. Uncertainty still remains as to which interactions between an analyst and a company (whether private or public) and / or its representatives interest amount to an analyst “participating in a pitch”. The Guidance presents four scenarios which AFME members consider should lead to member firms implementing procedures to govern further consultation/escalation by an analyst within his/her firm before a decision is taken as to whether the interaction takes place. These scenarios are:

  • a company requests an interaction with an analyst, which would also involve one or more of that company’s representatives;
  • an interaction request is made by a company that indicates that it is also in contact with investment banking personnel from the analyst’s firm;
  • an interaction request is made by any financial sponsor or private equity firm only; or
  • an interaction request is made by a party which indicates that a company is: (a) considering a transaction; (b) evaluating strategic alternatives; (c) seeking a view on valuation; (d) asking how best to position the company with investors; or (e) the subject of the meeting is a potential IPO or other offering.